Profiting From Responsible Investment

Whether you’re ethically minded or just looking for good returns, responsible investing could be the way of the future. And now it’s easy to find your perfect match.

- Domini Stuart

In his 1962 book Capitalism and Freedom, Nobel laureate and economist Milton Friedman dismissed corporate social responsibility as a fundamentally subversive doctrine. “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits,” he wrote.

Back then, it was accepted wisdom that all forms of responsible investing were incompatible with good returns. Over time, the picture has changed.

“Environmental, social governance (ESG) and ethical issues now sit alongside financial ones as critical components informing the investment decisions made by most professional investors,” says Simon O’Connor, CEO of Responsible Investment Association Australasia. “These issues have become a strong proxy for a well-managed company that will perform well as an investment over the medium to long-term.”

INVESTMENT, NOT CHARITY

Responsible investments broadly exclude companies involved in controversial industries, such as tobacco. The sub-sector usually known as impact investing also aims for a positive effect on society and/or the environment. Neither is synonymous with philanthropy.

“There is an element of commercial self-interest and we argue strongly that impact investment by definition is not philanthropy,” says Stirling Larkin, Chief Investment Officer of Australian Standfirst Asset Management, a thought leader for investor and philanthropic education. “The two shouldn’t be confused.”