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Ethical fund managers fail to meet investors' concerns over climate change

3 July 2019

Ethical investment managers are failing to meet the climate change concerns of retail investors in the choice of businesses to exclude from their funds.

Retail investors want ethical funds to exclude businesses involved in fossil fuels and violations of human rights in their supply chains, but investment managers are mostly screening out controversial weapons and tobacco.

Results from the Responsible Investment Association of Australasia (RIAA) show of the ethical managers surveyed, only 5 per cent of their combined funds under management had fossil fuels exclusions and 4 per cent exclusions for violation of human rights.

In comparison, 32 per cent of searches by consumers who use RIAA Responsible Returns' online tool to look up investment managers searched for those that exclude or negatively screen for fossil fuels, and 22 per cent searched for those that exclude for violation of human rights.

While environmental, social and governance integration (ESG) remains the most popular approach used by ethical fund managers in Australia, the money managed under ESG - at about $680 billion in 2018 - was unchanged from 2017.

The amount managed by funds that negatively screened their investment portfolio grew to just under $200 billion in 2018 from about $150 billion in 2017.