Six million working Australian's are "highly ethically active" according to research conducted by Australian Ethical, which the asset manager said would lead to mainstream products adopting tighter ESG screens.
Australian Ethical predicted that the current growth in ethical investing is due to the rise of the 'new economy' in which investors steer away from environmentally damaging products such as coal and instead favour ethical industries like healthcare, technology and renewable resources.
Australian Ethical argued the idea that investing ethically comes at the cost of good returns has been debunked, with research showing that more than 70% of respondents believe ethical investments will provide greater returns.
Speaking at a briefing in Sydney, Australian Ethical managing director and chief executive Phil Vernon said the rise of the conscious consumer will force the financial services industry to strongly consider divesting from unethical investments such as fossil fuels.
"In order to avoid dangerous climate change ... such a massive amount of capital needs to be moved in the next 30-35 years. We believe that all investment markets and corporate markets should commit to being at zero emissions by 2050," he said.
"The myth that investing ethically comes at the cost of good returns has been busted. Our Australian Shares managed fund is the best performing fund amongst its ethical and mainstream peers and has been for the past 10 years, according to Mercer."
"Australian Ethical avoids coal as an ethical decision, but it also makes financial sense. Coal and oil prices are declining due to structural factors: China is reducing its coal use, Japan is diversifying its energy mix and developed countries worldwide have falling electricity consumption rates. These changes are structural, not cyclical and we believe smart super funds will eventually stop investing in coal and move towards renewable resources, as a more risk-averse, forward-looking strategy," said Vernon.