A few years ago, ethical investing seemed to be everywhere. Lately, it's gone quiet. That's not because the options disappeared. Interest in ethical investing Australia-wide has held steady, even as the industry got a lot more careful about what it calls "ethical," and there's a very specific reason why.
Key Takeaways
- ASIC has fined three major funds a combined $34.7 million for greenwashing since 2024, with a fourth case still before the courts.
- Genuine ethical investment options have grown, not shrunk, since the conversation went quiet.
- Checking a fund's actual screening criteria, not just its name, is the easiest way to tell a genuine ethical option from a vague one.
Why the conversation went quiet
The real story isn't declining interest. It's regulatory enforcement, and it's a big part of why ethical investing in Australia has felt quieter over the past two years.
Since 2024, the Australian Securities and Investments Commission has taken several civil penalty actions against funds across the industry for overstating their ethical or ESG credentials, with combined penalties reaching $34.7 million across three concluded cases, and a fourth still before the courts.
What these cases had in common
The pattern across these cases has been similar: a fund's marketing or disclosure documents claimed to exclude certain sectors, such as fossil fuels or gambling, when the underlying investments didn't fully reflect that. It's less a story about any single fund and more a signal that the whole industry is being held to a higher standard of proof.
Funds and advisers have understandably gotten more cautious about how loudly they use the word "ethical," and that caution is what's made the space feel quieter, not a lack of genuine options.
What this means for your own investing
The lesson from this isn't that ethical investing doesn't work. It's that a fund's name or marketing isn't enough to confirm it does what it says. These enforcement cases have generally involved a mismatch between a fund's product disclosure statement and what it invested in.
Checking a fund's screening criteria directly, rather than relying on the word "ethical" or "sustainable" in its name, is the simplest way to avoid the same gap. As ASIC has said publicly, sustainability claims need to be backed by evidence, not just stated, and any entity that's clear and transparent in its disclosures has nothing to fear from that scrutiny.
Real ethical ETF options in Australia
Despite the quieter conversation, there are more ethical investment funds and ethical funds to invest in today than there were a few years ago, not fewer. A few of the established options:
Each fund applies its own screening methodology, and they genuinely differ in how strict those screens are, so it's worth reading the product disclosure statement rather than assuming two "ethical" funds work the same way.
Getting advice on ethical investing
Choosing between these options usually comes down to how strict you want the screening to be, and how that fits with the rest of your portfolio. A Morgans adviser can help you compare options against your own financial planning goals, not just their ethical label.
If you'd like to talk through where ethical investing fits into your broader strategy, a Morgans adviser can walk you through the options in plain English, with no assumption that one approach suits everyone. Find a Morgans adviser to get started.
Frequently Asked Questions
What is ethical investing?
Ethical investing means choosing investments based on environmental, social, and governance factors, alongside financial ones. It's also called sustainable or socially responsible investing, and it can be applied through ETFs, managed funds, or direct share selection.
Why has ethical investing gone quiet in the media?
Largely because of ASIC's greenwashing enforcement action against several major funds since 2024. Providers have become more cautious about how they describe their ESG credentials, which has made the space feel quieter rather than smaller.
Is ethical investing still a viable strategy?
Yes. The number of genuine ethical ETF and managed fund options in Australia has continued to grow, and there's no evidence that ethically screened portfolios need to sacrifice long-term performance.
How do I know if an ethical fund is a genuine one?
Check the fund's product disclosure statement for its specific screening criteria, rather than relying on its name alone. ASIC's recent enforcement cases all involved a mismatch between what a fund claimed and what it held.
Can ethical investing still deliver competitive returns?
Yes, though returns vary between funds depending on their screening approach and sector exposure. Ethical funds are not automatically higher or lower performing than the broader market.
Do I need a financial adviser to invest ethically?
It's not required, but an adviser can help you compare screening methodologies and fit an ethical allocation into your broader portfolio, rather than choosing a fund on name alone.
References
Australian Securities and Investments Commission: How to avoid greenwashing when offering or promoting sustainability-related products
Australian Securities and Investments Commission: Greenwashing: a view from the regulator
This article contains general advice only and does not take into account your individual objectives, financial situation, or needs. You should consider whether this advice is appropriate for you and seek personal advice from a Morgans adviser before making any financial decisions.
Jahanne is a Senior Investment Adviser who specialises in providing a holistic approach to wealth advice. Contact Jahanne today to discuss your investment strategy via [email protected] or 03 9947 4156.
