Sustainable Investing: The Role of ESG in SMSFs and Private Equity

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Reach Alternative Investments
October 30, 2023
min read

Sustainable Investing: The Role of ESG in SMSFs and Private Equity

As part of the continuing evolution of booming financial markets, sustainable investing has become a prominent part of responsibly managed portfolios. Principles relating to Environmental, Social, and Governance (ESG) considerations are now increasingly integrated into the investment strategies of Self-Managed Superannuation Funds (SMSFs) and private equity investments. Recognising these developments can help sophisticated investors stay on the cutting edge of financial strategy while maintaining responsible investment practices.

What is ESG Investing?

ESG investing refers to the practice of making investment decisions that not only consider potential financial returns but also the broader ecological, social, and governance impact of those investments. It represents an extension of traditional investing strategies, where the focus is on generating financial return, towards a more holistic perspective that also encompasses sustainability and ethical issues.

How does ESG Apply to SMSFs?

Australia's SMSF trustees are increasingly considering ESG factors in their investment decisions. This shift is driven by a combination of regulatory developments and the growing influence of sustainable and responsible investing. Aligning investment strategies with ESG factors allows trustees to potentially reduce portfolio risk and enhance long-term, sustainable returns. This method aligns well with the long time horizon of most superannuation funds.

How Does Reach Alternative Investments Incorporate ESG?

At Reach Alternative Investments, we stay true to our mission of making investing in private markets easier, better, and more transparent for our clients. One of the ways we do this is by integrating ESG considerations into our investment process, enabling us to align our clients' capital with their values without compromising on return potential. We believe the consideration of ESG factors can help to identify potential risks and opportunities that are often overlooked by traditional financial analysis.

What role does Private Equity play in ESG Investing?

Private equity firms play a crucial role in ESG investing by helping to promote responsible business practices. Reach Alternative Investments' unique approach allows Australian investors to access exclusive global private equity funds integrating strong ESG principles, opening the door to this exclusive asset class whilst also supporting sustainable practice. Private equity firms can use their influence and control over their investee companies to drive improvements in ESG performance, making these firms pivotal to the broader move towards sustainable investing.

Are ESG Investments competitive?

There is a prevailing misconception that investing for sustainability leads to sacrificing returns. However, this is not always the case, it can deliver competitive returns while mitigating potential risks. At Reach Alternative Investments, we are committed to providing wholesale clients with access to the best global private equity funds that adhere to sound ESG principles. Our research-backed solutions and accessible legal structures also mean investors can build their private market portfolios with confidence.

Why is ESG Important?

Beyond just the potential financial benefits, integrating ESG considerations into investment strategies signifies a commitment towards sustainable and responsible investing.

For sophisticated investors who self manage their superannuation, incorporating ESG considerations into their SMSFs and private equity investments can be a powerful way of aligning personal values with financial goals. At Reach Alternative Investments, we are dedicated to making this journey easier, better, and safer for our clients.

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