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Investor demand sees Kernel launch range of sustainable funds

Investment advisors and wholesale investors now have access to three new sustainable funds which give their clients exposure to domestic and international markets with a sustainable and ESG overlay.

Thursday, June 3rd 2021, 6:27PM 1 Comment

by Matthew Martin

Dean Anderson.

Kernal is an Auckland-based index fund manager that has grown rapidly since launching in 2019 and has created three new products in recognition of the importance of and rising demand for sustainable investment strategies.

Launching in June are the Kernel Global Green Property fund which provides exposure to global property assets that meet sustainability criteria, hedged to NZD; and the Kernel S&P Global Clean Energy fund which invests in clean energy-related businesses from around the world, including wind, solar, hydro generators, and renewable manufacturers.

The new funds include NZ 50 ESG Tilted, which will track a New Zealand ESG (Environmental, Social and Governance) index being developed with S&P Dow Jones Indices.

The fund will not only exclude stocks based on controversial business sectors including tobacco, gambling, and controversial weapons but also upweight and downweight companies based on non-financial metrics covering governance practices, sustainability scores, disclosure practices, fossil fuel exposure, and workplace diversity.

Kernel founder and chief executive Dean Anderson says the company created the funds in direct response to growing customer demand.

Anderson says the company's total funds under management is growing by between $5m to $10m a week.

“Investors are increasingly shifting their money into sustainable and ESG funds, as investors consider the impact their investment has in shaping the world they live.

"We’re seeing this demand across the investor spectrum,” he says.

“And aside from concerns about environmental and social issues, investors are also looking at sustainable investing as a way to make longer-term strategic investment decisions."

He says studies have shown companies that have adopted environmental, social and governance policies have outperformed those that don’t and he anticipates strong demand for the new funds.

"The shift to sustainable strategies will persist, as social and climatic issues continue to rise,” Anderson says.

“In addition, there are regulatory changes driving massive investment towards companies better prepared to tackle climate risk, as countries transition to a renewable, low carbon future.”

As a result, companies are increasingly considering their social responsibility and acting before regulations force change.

These changes are also having an impact on the financial services sector directly.

Recently, New Zealand became the first country to introduce a law that requires banks, insurers, investment managers, and companies listed on the NZX to make disclosures reporting their exposure to climate risks.

Equally, consumer demand has never been clearer, with research undertaken by RIAA and Mindful Money showing two-thirds of the public intend to invest ethically within the next five years, most of those within the next year (42%).

This presents an opportunity for investment advisors, says Anderson, particularly now that they can couple sustainable investment with the benefits of low-cost index investing.

“As with all our index funds, the three new products are designed to be tax-efficient, low cost and diversified.

"Not only does this support optimised investment returns for customers, but it also makes it accessible.”

Anderson says Kernel’s expansion into sustainable funds will help energise the local market.

“These three new funds extend our offering to 11 funds while giving the market new options to enable investors’ portfolios to adapt to the times and follow the rising awareness of sustainability in investing."

Tags: Dean Anderson ESG ethical investments Kernel responsible investing

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Comments from our readers

On 2 June 2021 at 7:26 pm John Milner said:
I've got a lot of time for Dean and the work his team are doing. Not so much for the RIAA and their surveys.
As Charlie Munger once said; Show me the incentive and I'll show you the outcome.

I'm looking forward to seeing the performance of these new funds against their unscreened benchmarks. I'm not convinced some ESG supporting advisers are disclosing potential long term underperformance against unscreened benchmarks.

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