How do you grow a market by 400% in 3 years? #shiftingcapital

In September 2015, RIAA launched our new 3-Year Strategy (see here) that contained one big audacious goal – to grow funds flowing into core responsible investment products from 2.5% of the market to 10% of the market in 3 years.
Stretch target? Yes. Achievable? We believe so.
Let’s start with definitions: Core Responsible Investment is a term we have long used in our annual Responsible Investment Benchmark Reports [insert link] to capture the primarily retail end of the RI industry – that is all funds that we refer to as ethical or SRI funds. This category also includes positively screened funds, sustainability themed funds (e.g. green property, renewable energy, low carbon, sustainable agriculture, water funds etc), community finance and impact investments.
So this is primarily a measure of retail demand for responsible investment, however, importantly, the retail and the institutional are inextricably linked. Take for example super funds: members of funds are retail investors, and when they start seeking out more responsible investment options (either in mainstream funds or within dedicated SRI options), then the institutions who manage that money respond.
We’re seeing this right now in fact. With the rapid rise in members engaging with their super funds on ‘ethical’ or values based issues ranging from fossil fuels, to tobacco and human rights, fund managers are subsequently getting many more queries from their super fund clients as to how they are managing their exposure to these issues and risks.
So, how do we think we can achieve this big goal of quadrupling the market in 3 years?
We believe the momentum has already begun to swing substantially and that our rather modest organisation can amplify that shift already underway.
For example:

  • The last two years have seen a doubling of funds flowing into core responsible investment products.
  • In that same period, fund managers in this Core RI area who manage over $1 bill in AUM have grown from 4 to 9 managers today

There are many signs that demand is only increasing at an ever more rapid pace:

  • The level of engagement by members with their super funds continues to increase, with many funds hearing regularly from their members on ESG or ethical issues
  • A number of super funds have recently strengthened and re-launched their SRI options in response to demand
  • RIAA is receiving a substantial amount of web traffic seeking out investment options through our Certification pages (see here [ink Cert pages])
  • Advisers are moving into this area on mass in response to client interest (e.g our adviser members have grown by 25% in the last 8 months)
  • Large numbers of RI, ESG, Ethical and SRI products are being brought to market to tap the demand across asset classes and investment styles – cash, fixed income, smart beta, ETFs, banking products, impact investments and specifically targeted super funds.
  • RIAA’s Certified funds have grown from 47 products in July 2015 to 80 products today.
  • There is a mountain of polling that indicates that vast majority – somewhere around two thirds of Australians – care about how their superannuation is invested, and expect that as a minimum their retirement savings are doing no harm. We have identified at least 5 different sets of polling indicating consistently similar results
  • And finally, we estimate there are around 20 NGOs in Australia with finance sector targeted campaigns, engaging their combined networks of around 1 million Australians (~4% of the population) to think about how they invest.

It’s these signals that have driven RIAA to target growing funds to 10% in 3 years. As our 3-Year strategy outlines, below is an insight into some of the key work we’ll be leading to drive this goal:

  1. The recent relaunch of our Certification Program (read previous blog here) is a key vehicle to unlock demand. We know from polling that the biggest barrier to the uptake of RI products is not enough independent information on the options and and not enough time to compare all the options. Our Certification program is intended to make it easier for consumers to understand the options available
  2. Certification Web-tool – as RIAA has previewed to our members, we’re working on a big project right now, that will present our 80+ Certified investment products in a consumer friendly manner, providing a “one stop shop” for investors seeking out ethical and RI products. This tool will allow those engaged consumers to easily sift and sort between investment products, and better understand the options and differences. This important web-tool will be launched mid-year.
  3. Public promotion of responsible investment will be a key ongoing part of this work, including continuing to build on our media work (RIAA has had 180 mentions so far this financial year).

There’s a lot of work to be done, but the momentum is real and significant right now. Working with our very dedicated responsible investment community, we are firmly of the belief that Australian’s do want their money invested responsibly, and are on the verge of demanding that on mass. For those investors not already considering this significant movement, you risk being caught out unprepared.
We look forward to working with you all to drive more capital into sustainable assets and enterprises to underpin strong returns and a healthier economy, society and environment.