Australians are increasingly looking for investments that do more than just deliver returns. Environmental, Social, and Governance (ESG) investing has emerged as a powerful approach for those who want to align their portfolios with their values—without sacrificing performance. But what exactly is ESG investing, and how is it evolving in 2025?
Understanding ESG: More Than a Trend
ESG investing integrates three key factors into investment analysis:
- Environmental: How a company manages its impact on the planet (think carbon emissions, renewable energy, waste management).
- Social: How a business treats its employees, customers, and communities (such as diversity, labour standards, and human rights).
- Governance: The quality of a company’s leadership, accountability, and transparency (from board structure to executive pay and anti-corruption policies).
Rather than just screening out ‘bad actors’, ESG investing seeks out companies proactively managing risk and creating long-term value. In 2025, this approach is not only mainstream—it’s influencing everything from superannuation funds to major bank lending policies.
Why ESG Matters in Australia in 2025
Several major shifts have turbocharged ESG investing in Australia this year:
- Mandatory Climate Risk Reporting: New ASIC and APRA regulations require listed companies and super funds to disclose climate-related financial risks and emissions data in line with global standards. This is making ESG data more transparent and comparable than ever.
- Net Zero Commitments: The federal government’s expanded climate targets and support for green industries have put pressure on businesses—and investors—to demonstrate credible pathways to net zero by 2050.
- Changing Consumer Values: Surveys in 2025 show over 60% of Australian retail investors now consider ESG factors important when choosing investments, up from 45% just three years ago.
Real-world example: In 2024, several of Australia’s largest industry super funds divested from companies failing to meet minimum ESG thresholds, including fossil fuel producers with no transition plans. This trend has only accelerated in 2025, with more funds offering dedicated ESG options and reporting frameworks.
How to Integrate ESG into Your Portfolio
Whether you’re new to ESG or want to take your investing to the next level, here’s how to get started:
- Look for ESG Ratings: Major research providers like MSCI, Sustainalytics, and the ASX now publish ESG scores for listed companies and ETFs. Compare these ratings and dig into what they actually measure.
- Consider ESG Superannuation Options: Most Australian super funds offer sustainable or responsible investment options. In 2025, MySuper default products must disclose their ESG screening and engagement practices, making it easier to choose a fund that matches your values.
- Direct Impact Investing: Some Australians are opting for managed funds or direct investments in green bonds, renewable energy projects, or social impact ventures. These often come with higher risk but can deliver measurable environmental or community benefits.
- Stay Alert for ‘Greenwashing’: Regulators are cracking down on misleading claims, but not all funds with ‘ESG’ in the name deliver genuine impact. Check for transparency, third-party audits, and clear reporting of outcomes.
Pro tip: In 2025, the Australian Sustainable Finance Institute launched a new voluntary ESG labelling standard for funds, helping investors spot credible options at a glance.
The Bottom Line: ESG Is Here to Stay
ESG investing is no longer a niche or a fad. For Australians, it’s a way to build wealth while driving change—backed by evolving regulations, growing consumer demand, and a market that increasingly rewards sustainability. As the world faces urgent social and environmental challenges, ESG investing offers a path to both financial and societal returns.
