Fortunately, the Responsible Investment Association Australiasia (RIAA), the peak body of ethical investors in Australia and New Zealand, have published a report covering this very issue. The RIAA compared the performance of a selection of ethical investment funds against mainstream funds that don’t apply a specific ethical framework. They compared performance over 1, 3, 5 and 10-year time frames based on the asset-weighted net returns.
How do ethical funds compare to Australian Share funds?
The first comparison has taken the average of 8-14 Australian share based responsible investment funds, the large-cap Australian share fund average and the S&P/ASX300 index. As can be seen in the below chart, the responsible investment fund outperformed the large-cap fund average and the S&P/ASX300 index by around 1-2% for all periods except the 1-year time frame
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How do ethical funds compare to International share funds?
The second comparison is of the average of 8-27 responsible international share with the large-cap international share fund average, and the MSCI World index. Here the responsible investment funds outperformed in the 1-year time frame, were comparable for the 5 and 10-year periods and under-performed in the 5-year period.
Related article: 10 Top Performing Ethical Investment Funds in 2018
How do ethical funds compare to Multi-sector growth funds?
Finally, the RIAA compared multi-sector responsible funds with the multi-sector growth fund average. In this instance, the average of 9-13 funds responsible investment funds sampled outperformed the mainstream average on all timeframes except for the 1-year return, where they were equal.
Overall, according to the RIAA report, responsible investment funds outperformed the mainstream fund average in 8 out of the 12 sample time frames, made an equal return in two time frames and under-performed in two. This report shows the responsible investments don’t necessarily equate to poor returns, instead, they have the potential to produce strong returns and even outperform more mainstream strategies at times.
Keep in mind
Of course, this is only a small, averaged sample, and a specific fund may have performed better or worse over the sampled time frames. It’s also worth keeping in mind that past performance isn’t a guarantee of future success.
You can read the full report here.
Cover image source: lovelyday12