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Responsible Investing

Fund managers owning more in so-called, bad companies

Many fund managers have gone backwards with their investing and increased exposures to companies investors want to avoid.

Saturday, August 27th 2022, 11:24AM 2 Comments

Mindful Money’s latest analysis of investment funds shows more money is being invested in companies of public concern, particularly fossil fuels.

“Most KiwiSaver fund managers claim they are acting responsibly, but the evidence shows that billions of dollars of the public’s hard-earned KiwiSaver and retail investment funds are still being invested in companies that the public wants to avoid,” Mindful Money chief executive Barry Coates says.

“Instead of making empty promises about being ethical and responsible, fund managers need to walk the talk and match their rhetoric with the reality of their portfolio holdings.”

Mindful Money’s analysis for the six months to March 31 shows that, far from reductions in the investments that most members of the public want to avoid, there have been substantial increases.

This latest update of portfolio holdings shows increases over the past six months in investments that Kiwis want to avoid:

  • fossil fuel investments:  28% increase for KiwiSaver funds and 64% for retail investment funds 
  • companies that test their products on animals: 10% increase for KiwiSaver funds and 19% for retail investment funds
  • alcohol companies: 7% for KiwiSaver funds and 26% for retail investment funds

“The latest trends in New Zealand investment are worrying,” Coates says. “After several years of reducing holdings in companies that the public want to avoid, fund providers have invested even more in companies that violate human rights and cause environmental damage; test products on animals; produce fossil fuel, weapons, palm oil and GMOs; and invest in companies making tobacco, alcohol, gambling and pornography.”

There has been a short term increase in share prices of the oil and gas sector, partly as a response to Russia’s invasion of Ukraine. But these are likely to be short term gains.

Over the decade to July 27, 2022, the value of oil and gas companies (measured by the US Oil and Gas Index) fell by 4.2% annually, compared to a rise in the average shares (measured by the S&P 500 Index) of 11.4%.

Coates welcomes the Financial Markets Authority’s recent report of responsible investing but says more information needs to be made available to investors.

“KiwiSaver and retail investment providers should have an obligation to tell the public about what they are doing with regard to reducing their harmful impacts on the climate, the environment and society, and their investments that finance positive benefits.”

He says there needs to be proper disclosure of social and environmental impacts of company operations.

“Reporting should be consistent and comparable, using clear standards, as there are for reporting on financial issues like fees, returns and benchmarks.”

Mindful Money is calling on the government to strengthen its proposals for reporting on climate impacts as part of the new Climate Disclosure legislation, and to introduce similar mandatory reporting requirements for the social and environmental issues that are of most concern to retail investors and the New Zealand public.

Tags: Mindful Money

« FMA ratchets up its campaign for better ESG disclosure from fund managersEthical KiwiSaver leaves others in its wake »

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Comments from our readers

On 28 August 2022 at 4:46 pm John Milner said:
I think most managers are heading in the right direction, when and where they can sustain returns is the issue and what we all demand. Avoiding areas of energy denies clients of performance as an example.
Looking at both the FMA & FSC reports highlights the reality of low support for ESG at this time. The academics call on performance of ESG is still out.
On 1 September 2022 at 10:14 am Ontheotherhand said:
Nuance is missing in black and white exclusions. Meridian (good) depends on Genesis (bad) to keep the lights on. Europeans will die with no gas. NZ society would greatly suffer with no fossil fuels. Wind turbines will not be built without steel, buses and BEVs will not be build without mines. It's all very well for Barry to tell me my weekly glass of wine and monthly whisky is immoral and should be banned, but his movement will only succeed if the rest of the population follows.

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