Opinion: Kiwi Saver investors care about the impact of their investment on the planet, and Kiwi Saver providers are increasingly recognizing it by offering more products.
The Responsible Investment Association of Australia (RIAA) released its report last week on the rise in responsible investment in New Zealand. Growth is significant, up 31 billion from a year ago. In fact, it indicates that responsible investment is growing twice as fast as the broader investment market.
As a sign of how investor interest in responsible investment is growing, the RIAA says investors are increasingly looking for strategies that address fossil fuels, human rights abuses and animal cruelty. But avoids investment. Of course more fund managers will adjust and adjust their products to meet this demand.
Interestingly, on the other end of the spectrum, fewer investors are looking for investments that eliminate tobacco reserves. This may sound strange because tobacco is the industry that fund managers avoid the most.
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The decline in investors seeking to quit does not mean that Kiwi investors suddenly believe that stockpiling tobacco is more acceptable. Most likely it tells us that investors now expect to quit tobacco, so there is no need to look for it.
This indicates that we have reached a point where tobacco companies should issue health warnings to kiwi savers or fund holders. It should clearly tell investors that it includes tobacco stocks.
Of Growing interest in responsible investment There are challenges for fund managers. Probably the biggest challenge is data integrity. External suppliers’ carbon footprint numbers and environmental, social and government (ESG) scores are not perfect. Managers need to recognize this and prepare their actions to constantly optimize the data available.
There are also challenges for investors. The word “greenwash” is mentioned several times in the RIAA report. Investors have a right to know that Kiwi Saver’s “green” claims are true to how Kiwi Saver invests. Managers cannot make financial products greener by wanting to be more sustainable. Marketing departments should not go beyond what their investment team is actually doing.
There is a lot of focus on Kiwi Saver Fund fees in New Zealand, but it is also important to acknowledge that a cheap fund cannot deliver the best responsible investment process. Active research on companies’ ESG metrics, engaging with companies, finding unlisted companies for investment, and collecting data on carbon emissions are all costs.
After all, the thing that investors should be most concerned about is their return after the fee. If investing actively and responsibly costs more than a passive investment strategy, but yields better returns, then the responsible option is more than just a set of values.
The good news is that the popularity of responsible investment is growing faster than New Zealand’s broader market.
It is also good news that the evidence points to financial returns that are the same and could be even better. Wealth growth and well-being is a win-win situation for investors.
John Berry is the Ethical Fund Manager and Chief Executive of Kiwi Saver Provider. Pathfinder Asset Management Which is part of Allium Wealth.