What is responsible investing?

Published 26 February 2021

Responsible investing involves considering environmental, social and governance (ESG) factors alongside financial analysis in investments decisions.

Investors worldwide are increasingly evaluating the risks associated with ESG factors in their investment programs. Examples include rising sea levels, carbon emissions, workplace health and safety, modern slavery and social licence to operate.

This article explains how responsible investing can be incorporated into a broader investment strategy, aimed at achieving long-term sustainable growth.

A broader view of risks and returns

ESG factors can impact the financial performance of an investment. Investors often look to place a value on ESG factors and consider them alongside traditional financial performance analysis.

Responsible investing is different from strategies such as ethical investing and sustainable investing. These strategies have moral or ethical goals, and they tend to use negative screening to avoid investments that compromise an investor’s values.

However, responsible investing assumes that ESG factors have financial relevance, so they can be evaluated. Analysis of ESG risks and returns can be incorporated into a wider decision-making process for investments.

LGIAsuper’s investment program

LGIAsuper recognises the importance of responsible investing within a broader investment strategy. We consider ESG factors alongside many other financial and economic risks across all our investment options.

Our aim is to deliver long-term solid returns for our members. Incorporating ESG investing into our wider asset evaluation can help us to achieve long-term growth. This is because many ESG risks are longer-term in nature, so they are more likely to impact on assets with a long-term investment horizon – such as property and infrastructure assets.

Here are some examples of LGIAsuper’s investments showing potential for delivering long-term sustainable growth, as well as some of the related ESG considerations around these investments:

• Waterloo Wind Farm – generating clean, renewable, carbon-free electricity.
• Controlled Environment Foods – greenhouse food production in North America, where food security and resource conservation are key priorities
• Sunshine Coast Airport – the first Australian airport to achieve carbon neutrality.
• Gold Coast Light Rail – recognised for its sustainable approach by the Infrastructure Sustainability Council of Australia.
• Regional Livestock Exchanges – places a strong emphasis on animal welfare, environment protection and biosecurity.
• Investments with some of the highest-rated property managers on the Global Real Estate Sustainability Benchmark (GRESB).

Socially Responsible options

Our members have different needs and priorities. For our members that would prefer investments based primarily on socially responsible and ethical criteria, we have two Socially Responsible (SR) options: SR Balanced and SR Australian Shares.

LGIAsuper’s fund manager for Socially Responsible options is Pendal Group, which has strong capabilities and industry leadership in responsible investing.

Further information can be found at investment options, and in the Investment choice guide for your account at Product Disclosure Statements and guides.

Talk to us

If you would like to discuss ESG investing further, our Investments Team is here to help.

LGIAsuper members can also receive financial advice* on their investment options. Limited advice on a single topic is available at no additional cost. More comprehensive financial advice is also available, and fees vary depending on the type and complexity of advice.

Call us on 1800 444 396 if you would like to discuss your investments with us.