MONEY

MONEY MATTERS

PAUL CLITHROE

INVESTMENT CHOICES CAN SUPPORT POSITIVE CHANGE AND HONESTY IS THE BEST POLICY

THE LATEST REPORT ON GLOBAL WARMING PAINTS A GRIM PICTURE. BUT INVESTORS HAVE AN OPPORTUNITY TO SUPPORT CHANGE THROUGH THEIR PORTFOLIO.

When the Intergovernmental Panel on Climate Change (IPCC) released its latest report, it made headlines globally. No surprises there – the report pulls no punches on the need for urgent climate action.

As individuals we can feel powerless to bring about large scale change even though we may be doing our bit on a personal level by making eco-friendly choices.

As investors however we can collectively carry real clout, and demand for ‘responsible’ investments is growing rapidly. An industry report shows there is now a total of $1,149 billion held in responsible investments in Australia. That’s over one-third of the value of the total managed funds market.

‘Responsible’ investments look for opportunities that embrace environmental, social and governance (ESG) criteria that benefit people and the planet. That can include opting for investments that support the environment such as renewable energies, or screening out negative industries like, say, tobacco or gambling. A survey by the Responsible Investment Association of Australasia (RIAA) found consumers are especially keen to avoid investments associated with fossil fuels, human rights abuses and armaments.

The good news is that responsible investing doesn’t have to come at the cost of strong returns. The RIAA found Australian share funds with a responsible focus dished up 10-year returns averaging 9.0 per cent annually compared to the market returns (as measured by the ASX 300) averaging 7.8 per cent each year. It’s a similar story with international responsible investment funds, which have achieved long term returns above the market average.

If you’re keen to invest in a way that supports the planet – and your own views on issues like social responsibility, there is a range of options to pick from.

A growing number of super funds offer responsible investment choices. There’s also a broad selection of exchange traded funds (ETFs) dedicated to sustainable investments including some that focus on overseas markets. Just be sure to take a close look at what the ETF is really investing in so you can be confident the fund’s underlying investments are among those you would choose to invest in personally.

Meantime, when it comes to money matters, honesty really is the best policy.

Millions of Australians have told a fib in order to get a discount on their life insurance policy, according to new research by Finder. The national survey found 20 per cent of Australians, equal to over 3.8 million people, have lied in order to get a cheaper policy.

Being a smoker is one of the biggest reasons for misleading a provider (9 per cent), as is mental health (9 per cent). This is followed by the nature of one’s job (8 per cent), alcohol consumption (7 per cent), a pre-existing condition (6 per cent) and hobbies such as extreme sports (4 per cent).

When it comes to our personal finances, being open and honest pays off. Whether you want to call it gilding the lily or pulling a swifty, insurance is one area where painting a less than accurate picture can leave you out of pocket potentially with zero benefit.

Lying on life insurance applications can be especially dicey. Premiums are based on the risk you represent. If you’re not 100 per cent honest with an insurer, any claims can be rejected. That can mean a waste of the money spent on premiums, as well as leaving your family in the lurch financially if something happens to you.

Sure, coming clean with an insurance company – for any type of policy, can mean paying a higher premium. But that’s got to be better than paying good money for a policy that’s worthless because you weren’t entirely upfront.

The temptation to stretch the truth isn’t limited to insurance. I’ve also come across research that shows close to one in three home buyers can fudge their home loan applications. In today’s rapidly rising property market, fear of missing out may make it tempting to bend the truth on a loan application. However, the reality can be living with a loan you really can’t afford, and that can be a path to financial stress.

With millions of Australians doing their tax returns each year, sticking to the facts pays here too. The Tax Office uses sophisticated data matching technology that can show in a flash if you’ve underestimated income or fudged other aspects of your tax return.

In fact, the tax man is urging Australians to hold off slightly on lodging tax returns. It can take time for employers, banks, private health insurers, and government agencies to compile the details needed for the Tax Office to electronically cross-check details on your personal tax return. The pandemic means some of these details may not be finalised until later than usual July.

Waiting a little while can mean the prefilled aspects of your tax return are accurate, helping you get the right refund sooner. That’s a far happier outcome than copping a ‘please explain’ from the Tax Office if something isn’t quite right with your tax return.