Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Australian Ethical

  •   27 April 2021
  •      
  •   

Australian Ethical research: Climate change now #1 driver for ESG investors

Tuesday 27 April, Sydney: New research by Australia’s original responsible investment manager and super fund Australian Ethica and research company Investment Trends shows that climate change and environmental factors have been, and will continue to be, the number one driver of investment decisions by those who consider ESG factors when making investment decisions (“ESG investors”).

According to the survey of 2,854 Australian investors and 321 financial advisers, 78 per cent of ESG investors intend to invest based on environmental factors in the next 12 months, compared to corporate governance (46 per cent), ethical beliefs (43 per cent), social issues (34 per cent), and indigenous issues (31 per cent).

This has increased over the last year, when actual purchases of an investment or stock based on environmental factors was 58 per cent, compared to 34 per cent for ethical beliefs, 25 per cent for corporate governance, 20 per cent for social issues, and 11 per cent for indigenous issues.

Despite these trends, however, advisers are more cautious: just 40 per cent said they discussed ESG investing with their clients in the last 12 months, despite the overwhelming demand from investors.

It is also investors, not advisers, who predominantly initiate ESG investment decisions: 55 per cent of new inflows allocated by advisers to ESG-aligned investments in the last 12 months were driven by investors.

When it came to choosing the right ESG product provider, ESG investors cited the provider’s reputation as the most important factor (87 per cent), encompassing investment track record, distribution network, brand name recognition, and stated ESG values.

Across generations, the number one action thought to positively impact the environment and society was “clean and renewable energy sources” according to millennials (25-39 years), “energy consumption reduction” to Zoomers (18-24 years), and “recycling of non-biodegradable waste” to all other age groups.

Accumulators were most likely (35 per cent) to say they would invest in companies focused on creating a positive social or environmental impact, while Zoomers were most likely (32 per cent) to actively avoid companies that create social and environmental harm.

In the last 12 months, 74 per cent of Zoomers (18-24 years) also said they had bought an investment or stock based on environmental factors.

John McMurdo, CEO and MD of Australian Ethical, said: “At Australian Ethical, we’ve known for many years that climate change would and should become a key driver of private investment decisions.

“This is why we’ve ensured climate-friendly frameworks are integral to our investment philosophy, which has driven a 34-year track record of above-market returns in our premium products.

“But not all Australians have the time, energy, or experience to invest in and generate positive sustainable returns from these thematics, which is where Australian Ethical can help. We offer a range of options in our managed funds and superannuation that enable investors to gain exposure to climate-positive investments via one of Australia’s most experienced responsible investment managers.”

Sarah Brennan, CEO of Investment Trends, said: “ESG will further become a key component of the investing landscape, and this is set to continue to grow. Licensees, platforms and product issuers who ignore it do so at their peril. Our new research shows that not only are investors living their ESG values and partaking in a range of climate-conscious activities, the vast majority want to tackle climate change issues as they build wealth.

“The climate activities and themes which Australian investors are most interested in are new technologies such as for clean and renewable energy, carbon emission reduction, as well as initiatives to reduce energy usage, and recycling.

“When it comes to their views of how ESG investing impacts long-term returns, Australians have different perceptions depending on how they are currently invested. 82% of consumers who are invested in ESG believe returns will either be better or about the same than other investment strategies. In contrast, 43% of non-ESG investors believe they will be worse off,” explained Brennan.

“Importantly, ESG managers have an opportunity to help educate investors about areas such as performance and assist them access information more easily to alleviate any concerns about investment returns.”

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

Latest Updates

Shares

Why the ASX may be more expensive than the US market

On every valuation metric, the US appears significantly more expensive than Australia. However, American companies are also much more profitable than ours, which means the ASX may be more overvalued than most think.

Economy

No one holds the government to account on spending

Government spending is out of control and there's little sign that Labor will curb it. We need enforceable rules on spending and an empowered budget office to ensure governments act responsibly with taxpayers money.

Retirement

Why a traditional retirement may be pushed back 25 years

The idea of stopping work during your sixties is a man-made concept from another age. In a world where many jobs are knowledge based and can be done from anywhere, it may no longer make much sense at all.

Shares

The quiet winners of AI competition

The tech giants are in a money-throwing contest to secure AI supremacy and may fall short of high investor expectations. The companies supplying this arms race could offer a more attractive way to play AI adoption.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Infrastructure

Renewable energy investment: gloom or boom?

ESG investing has fallen out of favour with many investors, and Trump's anti-green policies haven't helped. Yet, renewables investment is still surging, which could prove a boon for infrastructure companies.

Investing

The enduring wisdom of John Bogle in five quotes

From buying the whole market to controlling emotions, John Bogle’s legendary advice reminds investors that patience, discipline, and low costs are the keys to investment success in any market environment.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.