Responsible investing gains new momentum

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There's a new name for investing responsibility and it seems there's also a new wave of interest in these sorts of funds. The term ethical investing, or socially responsible investing (SRI), appears to be declining and is being replaced with a simpler, less loaded term – responsible investing (RI).

Thursday, June 12th 2008, 9:28AM

One of the great mysteries over the years has been why RI hasn't taken off. Considering the collective credentials of New Zealanders – clean and green, nuclear free, anti-whaling and sustainable agricultural practices (just to name a few), you could argue that Kiwis would flock to RI funds.

This hasn't happened. While RI has shown strong growth in other countries we benchmark ourselves against, Australia, the United States and the United Kingdom, it has gone nowhere.

These are some of the statistics which paint this picture clearly. In the United States $1 in every $10 invested goes into "screened" funds, across the ditch responsible investment funds have grown 380% in three years. Meanwhile, research from the Responsible Investment Association says that only about $37 million invested in RI here.

There have been many funds investors who haven't supported them and consequently there have, until recently, been very few RI options for New Zealanders.

This situation is changing quickly, thanks partly to new funds and the birth of KiwiSaver.

When you look at the market it can be split into two groups; one is KiwiSaver funds and the other is non-KiwiSaver.

Asteron's Socially Responsible Investment Trust with just over $3 million of funds under management was the first KiwiSaver fund to come to market and it has been joined by a number of other providers in the first six months. Those adding RI funds to their offering include Aventine, ASB Bank and ABN Amro Craigs.

ASSET understands others, such as Fidelity Life, are not far off adding RI options to their KiwiSaver offerings, while the likes of AMP, AXA and Mercer have all indicated they are considering RI funds.

In the non-KiwiSaver space the key player is Hunter Hall which brought its successful flagship fund to New Zealand and also, last year, launched its Deep Green Fund.

Other managers are some of the niche funders including Prometheus, ASB Community Trust, Just Dollar$ Trust, Quaker Investment Ethical Trust and the New Zealand Anglican Church Pension Board.

One of the big questions people have is an understandable one: Is there a trade-off between returns and investing responsibly?

Plenty of studies have been done on this question and the answer appears no. Indeed RI maybe healthy for returns.

The United Nations Asset Management Working Group and Mercer reviewed a sample of academic and broker research and concluded that integrating environmental, social and governance factors (ESG) into investment decisions could match or improve current performance. It found that out of 20 academic studies, 10 found a positive relationship between ESG factors and performance, seven were broadly neutral, and three negative.

In a new book on RI, financial planner Rodger Spiller says, "most of today's investors are not choosing to invest responsibly and so are missing out on the opportunity to make a difference as well as making money. One of the reasons why people do not invest responsibly is that they perceive incorrectly that they cannot make money and address environmental challenges.

"Another reason is that many people are not aware of the options that exist or do not know how to invest responsibly."

His vision is that by 2020, responsible investing will be the norm in New Zealand. "Most New Zealanders will have a responsible investment plan and portfolio, including a KiwiSaver scheme.

"All investment advisers will have been trained in responsible investment and be able to converse intelligently with their clients on social and environmental matters."

As part of his vision all fund managers will use responsible investment criteria as part and parcel of their mainstream investment activity.

"Responsible investment and responsible business will be mainstream, with investors and businesses doing well."

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