What’s the difference between responsible and ethical investing?13 Dec 2023 4 min read
The terms ethical investing and responsible investing may seem the same, but they are in fact different.
What is responsible investing?
The Australian Centre for Corporate Responsibility describes the term ‘responsible investing’ as investments made based on the premise that environmental, social and governance (ESG) issues can affect financial performance.1
What does responsible investment look like at NGS Super?
In 2021, NGS Super made the decision to transition to a carbon-neutral investment portfolio by 2030 and are guided by our responsible investing policies principles when it comes to making decisions.
What does this mean for our investment portfolio?
The best financial interests of our members is always our first consideration and when making investment decisions NGS uses a return to risk philosophy. This means we are continuously assessing our investments against potential risks over the short and long term. This approach helps us to make decisions where to invest – and where to divest from.
While we have divested from several oil and gas production companies, such as Woodside and Santos we remain with Exxon and Chevron – two companies that fall under Integrated Oil and Gas. Why? These companies have additional revenue streams in exploration and production, and therefore currently fall outside of the scope of our exclusion list.
We recognise that the world still has a need for oil and gas, but we also recognise that companies operating in this space, must have a plan to transition into renewables to be considered a responsible investment. For example BP and Shell and Total Energies are investing in renewable energy projects such as wind and solar, while Chevron and ExxonMobil are looking at energy solutions which will require more time to become commercial at scale, such as Carbon Capture, Hydrogen and Biofuels.
How is responsible investing connected to financial returns?
NGS invests by balancing the need to manage investment risk and climate risk, while maximising returns for our members. Acting in the best financial interests of our members is always our priority.
We work to identify the investments that will generate strong returns, both now and in the future. We regularly review our carbon neutral targets and investment strategies and if we believe our actions may jeopardise our members’ best financial interests, we will make appropriate adjustments.
What is ethical investing?
Ethical investing refers to the practice of using one’s ethical principles as the primary filter for the selection of securities investing. Ethical investing depends on the investor’s views.2
Is NGS Super an ethical investor?
NGS is not ethically based or accredited as a sustainable investor, which means we don’t apply negative or positive screens to investments based on ideology. Ethical investing means restricting investment to companies or industries that match the ethics or values of the investor, using this as the primary filter for investment choices.
Why doesn’t NGS Super invest ethically?
As an ethical investor, you may need to be prepared to accept lower returns as the ‘price’ for investing will be according to your beliefs. When we elect to divest from an industry or company such as tobacco, we do so on the basis that we believe their future revenue will be impaired relative to other industries or companies that don’t present such risks.
NGS takes a continuous improvement approach in responsible investment. That's why our Investments team works hard to create a robust portfolio that achieves strong returns over the long term, while integrating responsible investments for tomorrow - for both you and the planet.