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Three ESG options added to LifeGoals investment menu

Due to the increased demand from investors, Centuria LifeGoals Investment Bonds has launched three new responsible investment options. Responsible investment, or otherwise known as Environmental, Social and Governance (ESG) Investment allows investors to invest in funds that integrate ethical and sustainable themes across the investment process.

The new ESG investment options are;

Alphinity Sustainable Share Fund Alphinity
Walter Scott Global Equity Fund Walter Scott
Pendal Sustainable Balanced Fund Pendal

What are the main considerations of responsible investing?

Environment Social Governance
environment Climate Change social Human Rights governance Bribery and Corruption
Resource Depletion Modern Slavery Executive Pay
Waste Child Labour Board Diversity and Structure
Deforestation Working Conditions Political Lobbying and Donations
Pollution Employee Relations Tax strategy

The global sustainable universe attracted USD152.3 billion in net inflows in the fourth quarter of 2020, up 88% from USD82.6 billion in the prior quarter. Europe accounted for the bulk of it (79.3%), while the U.S.A. accounted for close to 13.4% of it. Flows in the rest of the world were considerably higher than in previous quarters, clocking in at USD11.1 billion for Canada, Australia, New Zealand, Japan and Asia combined. This is compared with USD9 billion in the previous quarter.

Figure 1: Quarterly Global Sustainable Fund Flows (USD Billion)

Quarterly Global Sustainable Fund Flows

Is there a sacrifice in performance compared to non-ESG Funds?

In short, historically no. In the 10 years to 31 December 2019, funds available to Australian investors applying “responsible investment practices” outperformed the main indices across Australian Shares, International Shares and Multi Asset Growth Funds.

Figure 2: Performance of Responsible investment against mainstream funds (weighted average performance net of fees over 10 years)

Australian share funds 1 Year 3 Years 5 Years 10 Years
Average responsible investment fund (between 17 and 48 funds sampled depending on time period) 24.7% 11.3% 10.1% 9.0%
Morningstar: Australia Fund Equity Large Blend* 22.3% 9.0% 7.8% 6.8%
S&P/ASX 300 Total Return 23.8% 10.3% 9.1% 7.8%
International share funds 1 Year 3 Years 5 Years 10 Years
Average responsible investment fund (between 13 and 50 funds sampled depending on time period) 22.5% 13.7% 11.0% 11.9%
Morningstar: Equity World Large Blend* 25.2% 12.6% 10.8% 10.9%
Multi-sector growth funds 1 Year 3 Years 5 Years 10 Years
Average responsible investment fund (between 13 and 39 funds sampled depending on time period) 19.48% 11.26% 8.73% 8.24%
Morningstar: Australia Fund Multisector Growth* 16.22% 7.56% 6.52% 6.88%

 

*Source: Morningstar Direct Outperformed by the average RI fund Underperformed by the average RI fund