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Responsible Investing

Responsible investment on the rise - report

The Responsible Investment Association of Australasia (RIAA) says ethical investment is ticking up in this country.

Tuesday, October 18th 2022, 9:50AM 4 Comments

by Eric Frykberg

That is according to results of a study that RIAA commissioned from EY.

It shows the portion of New Zealand assets managed with a rigorous approach to responsible investment reached 49%, and totalled $179 billion, at the end of last year.

It said that was up from 43% in 2020.

The study said Investment managers were expanding their responsible investment offerings, improving transparency and disclosures,and ramping up engagement with companies on sustainability and ethical criteria.

It also said responsible investments produced superior financial returns. 

“It’s clear that the trade-off between strong long-term financial returns and investing ethically and responsibly is a myth that is being left in the dust, said Dean Hegarty, the New Zealand-based Executive Manager of Membership and Engagement at RIAA.

“Those investments that have been through a rigorous process of certification by RIAA have on average produced greater returns than both non-certified responsible investing products and traditional investments.”

The analysis looked at 52 investment firms and found 19 had adopted leading responsible or ethical investment practices and a further four were ‘emerging’ or close to leading, when measured against RIAA’s Responsible Investment Scorecard.

“This year’s report shows that the rising tide of codes, standards, and guidance facing investors has lifted all boats,” Hegarty said. 

“For example, negative screening for fossil fuels and weapons increased at the same time the government’s requirements for default KiwiSaver providers to exclude such investments came into effect in July 2021”

Hegarty also said iInvestment managers were getting much better at spotting claims of greenwashing.

A senior EY manager, Pip Best, said responsible investors were looking at issues like
climate change and greenhouse gas emissions as well as Government integrity and indigenous rights. 

Hegarty said negative screening of companies was important but positive investment decisions were was a better way.

“While divestment remains an important strategy driving change in some sectors, meaningful engagement, done the right way, has the power to produce real-world outcomes and
transitional support that divestment cannot,” he said.

Tags: RIAA

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Comments from our readers

On 18 October 2022 at 5:23 pm Murray Weatherston said:
If and when 80 or 90 or an even higher percentage of funds are ESG /RI compliant, how do you think managers will then strategy-differentiate themselves from their competitors.
On 19 October 2022 at 9:47 am John Milner said:
Everyone is going non-binary Murray. Get with the programme!
On 21 October 2022 at 8:22 am Murray Weatherston said:
@John
Je ne comprend pas!
On 21 October 2022 at 11:54 am Pragmatic said:
I’ve found the ESG adoption interesting. For starters, the G has always existed. This leaves the E & S - much of which is either highly subjective or commercial suicide to oppose (ie: imagine a fund that focuses of armaments, slavery & other socially unacceptable stuff).

Since the introduction of the UNPRI standards, the majority of mainstream managers have documented their ESG processes - again: with many of these already being adopted. Some have sought a marketing advantage by extending their ESG advocacy, none (to my knowledge) have gone in the other direction.

So the net result (for me at least) is that the industry is there or thereabouts on ESG. Sure there’s greenwashing, and some are more enthusiastic about ESG than others, but I reckon the differential has more or less evaporated

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