Sustainable investing, also known as ESG (Environmental, Social, and Governance) investing, is rapidly gaining popularity in Australia. Investors are now considering not only profits but also the impact of their investments on the environment and society. The big question many Australians ask is: “Is sustainable investing profitable?” This blog explores this topic with detailed explanations, examples, and calculations to help you make informed financial decisions.
What is Sustainable Investing?
Sustainable investing involves choosing investments based on environmental, social, and governance criteria, alongside financial performance. For example, investors may avoid companies that pollute heavily or exploit workers and instead focus on companies promoting renewable energy, ethical labor practices, or strong corporate governance.
Why Sustainable Investing Matters in Australia
Australia faces unique environmental challenges like bushfires, water shortages, and climate change impacts. Investors here are increasingly aware that their money can support companies contributing to a greener, more ethical economy.
Some key reasons Australians are turning to sustainable investing:
- To combat climate change and environmental issues.
- To support ethical companies and fair labor practices.
- To reduce long-term investment risk, as sustainable companies tend to have better governance.
Historical Performance of Sustainable Investments
Many people think ethical investing comes at the cost of profit. However, recent data shows this is not true. Let’s look at examples using Australian and global funds.
Example 1: ESG Fund vs Traditional Fund
- Traditional Fund: Australian Equity Fund invests in top 50 ASX companies. Historical return: 10% per year.
- Sustainable Fund: Australian ESG Fund invests only in companies with strong ESG scores. Historical return: 11.5% per year.
Calculation of growth over 5 years with $10,000 investment:
Traditional Fund:
Future Value = 10,000 × (1 + 0.10)^5 = 10,000 × 1.6105 = $16,105
Sustainable Fund:
Future Value = 10,000 × (1 + 0.115)^5 = 10,000 × 1.718 = $17,180
✅ The ESG fund outperforms by $1,075 over 5 years.
Factors That Make Sustainable Investing Profitable
1. Long-Term Growth
Sustainable companies often focus on renewable energy, technology, and health. These sectors are expected to grow strongly in Australia and globally, giving investors higher returns over time.
2. Risk Management
Companies with poor ESG practices face fines, legal issues, and reputational damage. Sustainable companies tend to be more resilient, reducing investment risk.
3. Rising Demand for ESG Funds
According to a 2025 report, sustainable funds globally received record inflows of $16 billion in Q4 alone, nearly double the previous quarter. High demand can drive better fund performance.
Real-Life Examples: Is Sustainable Investing Profitable
Example 2: ASX ESG ETFs
- iShares MSCI Australia ESG Leaders ETF (IESG.AX): Focuses on high ESG scoring Australian companies.
- SPDR S&P/ASX 50 ETF (STW.AX): Traditional top 50 companies in Australia.
Performance over 3 years:
- IESG.AX: 12% annual return
- STW.AX: 10% annual return
Calculation with $20,000 investment over 3 years:
- IESG.AX: 20,000 × (1 + 0.12)^3 = 20,000 × 1.4049 = $28,098
- STW.AX: 20,000 × (1 + 0.10)^3 = 20,000 × 1.331 = $26,620
✅ Sustainable ETF earns $1,478 more than traditional ETF.
Common Misconceptions About Sustainable Investing
- Myth: Sustainable investing gives lower returns.
Fact: Many sustainable funds outperform traditional funds. Historical data shows ESG-focused ETFs in Australia have delivered competitive returns. - Myth: There are fewer companies to invest in.
Fact: Australia has a growing ESG universe, including mining, banking, energy, and technology sectors. - Myth: ESG investing is only for ethical purposes.
Fact: It’s profitable too. Investors can align their values with growth potential.
Tips for Australians to Invest Sustainably
- Check ESG Ratings: Look at environmental, social, and governance scores of companies or funds.
- Diversify: Don’t invest in only one sector. Diversification reduces risk.
- Use ETFs and Index Funds: These funds provide exposure to multiple ESG companies at low cost.
- Monitor Performance: Track annual returns to ensure your investment aligns with goals.
Australian Market Trends in Sustainable Investing
- Sustainable assets in Australia are growing rapidly, with ESG funds now accounting for a significant portion of managed assets.
- Younger Australians, especially Millennials and Gen Z, prefer sustainable investments. About 85% of young investors in Australia are interested in ESG funds.
- Sectors like renewable energy, electric vehicles, and sustainable agriculture are attracting most of the investment.
Practical Example: Comparing Investment Strategies
Suppose you have $50,000 to invest for 5 years.
| Fund Type | Annual Return | Future Value (5 years) |
| Traditional ASX Fund | 9% | $76,000 |
| ESG Australian Fund | 11% | $85,500 |
✅ ESG Fund earns $9,500 more, proving profitability with real numbers.
Also Read: Ethical Investing Explained: A Complete Guide for Beginners
Conclusion
Sustainable investing in Australia is not just about ethics—it is profitable. With proper research, diversification, and attention to ESG criteria, investors can achieve returns equal to or higher than traditional investments. Australians can now align their financial goals with personal values, supporting companies that create positive social and environmental impacts.
Sustainable investing represents a win-win: profit potential and a better future for our planet.
