The 2018 New Zealand Responsible Investment Benchmark Report, produced by KPMG and the Responsible Investment Association Australasia (RIAA), shows “core responsible” investments grew by 102% in the past year, totalling assets of $86.4 billion.
Core responsible investments are primarily negatively screened funds, where blacklisted sectors, such as arms, are banned. They also include funds where investment teams regularly assess a public company's ESG compliance.
Funds that incorporated some form of environmental, social and governance element grew by 9% in the year to December 2017. The “broad responsible” funds had a total AUM of $97 billion.
Total responsible investments in New Zealand reached $183.4 billion in 2017, up 40 percent from the $131.3 billion invested the prior year.
It comes as a growing number of studies suggest responsible investing enhances investment returns. According to the RIAA report, core responsible investment funds outperformed equivalent New Zealand equities funds and multi-sector balanced funds in 2017.
The RIAA report found pressure from clients, and a growing awareness of ESG’s impact on returns, were the main drivers behind RI growth.
Revelations in 2016 that KiwiSaver funds had invested in tobacco and arms also led to greater focus on RI, according to Simon O’Connor, chief executive of the RIAA.
O’Connor told Good Returns that Kiwi fund managers had taken a stronger stand on ESG, and had taken up responsible investing “well beyond” their Australian counterparts. He added: “The focus on KiwiSaver investments flowed through to the majority of the market in 2017. We now have a base level of screens across the investment market. This is just step one of the process. It is pleasing we are moving beyond exclusions. Issues beyond tobacco and weapons, such as climate change and human rights, are being engaged more by the investment community.”
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