Australia Funds Plan Five-Fold Increase in Climate Investment

(Bloomberg) --

Australian investments in clean energy, conservation and other initiatives that have a positive environmental or social outcome are set to rise five-fold to A$100 billion ($67 billion) in the next five years, according to a survey published Tuesday.

More than 90% of respondents said their so-called impact investments had met or exceeded their return expectations, the Responsible Investment Association Australasia said in the report.

On a weighted average basis, respondents indicated that their ideal allocation toward impact investments would increase to 4% of assets under management from 0.7% currently. Some 125 investors, from pension funds to family offices managing a total A$1.7 trillion, were surveyed for the report.

The money is flowing into green and social assets as institutional investors see “they’re stacking up financially,” said Simon O’Connor, the RIAA’s chief executive officer. “That will mean there’s going to be a re-allocation of assets toward more green-type investments.”

Impact investments in Australia more than tripled to A$19.9 billion over the past two years, amid increased pressure from environmentalists and from pension funds’ own members to step up action against climate change. At the end of 2019, green, social and sustainability bonds made up 85% of such investments, according to the report.

Bets on companies with strong environmental, social and governance characteristics have paid off. The MSCI World ESG Leaders Index outperformed its underlying benchmark of global stocks by about 1.8% in the two years to Dec. 31, 2019. The index has also fared better this year amid the coronavirus sell-off.

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