The Chief Executive of KiwiSaver provider and fund manager Pathfinder says investing ethically is the way of the future and bigger KiwiSaver providers need to jump on the bandwagon.
“Our mission is to mainstream ethical investing. We have to get the big providers excited and get them on board with it,” John Berry told interest.co.nz.
Pathfinder specialises in ethical investing, emphasising environmental, social, and governance (ESG) criteria to deliver positive financial returns alongside social and environmental benefits.
Berry and Paul Brownsey co-founded Pathfinder in 2009 and then launched its first sustainable equity fund in 2010. In 2019, Pathfinder launched its first KiwiSaver fund.
Berry says changing the mindset around what it means to invest ‘ethically’ is key as the thinking in New Zealand when it comes to ethical investing has generally been about what to avoid.
Thinking about what’s on the avoid list – maybe it's weapons, maybe it’s tobacco – is important in the sense that it aligns your investing with your values, Berry says.
But if you want to drive change in the world, he believes just avoiding companies or industries that go against your personal values is a slower, longer approach to driving that change.
“[A] bigger way to drive change is to flip it on its head and say, 'okay, well, I've avoided these companies, but where do I actually put my money?' And that for me is a much more interesting question,” he says.
Berry identifies five layers of ethical investing: exclusions, better companies, sustainable themes, engagement and calls impact investing the “new frontier” of ethical investing.
Impact investing involves funding generally private companies to achieve both social or environmental goals and financial returns.
Berry highlights Pathfinder's investments in Lodestone Energy’s solar farms, Mint Innovation’s clean technology, and Community Finance’s social housing as prime examples of Pathfinder’s own impact investing.
“I'm just a really strong advocate [that] KiwiSaver should be in the private asset space. But there’s too few KiwiSavers doing it,” he said.
“We’re putting capital into New Zealand businesses and into social housing and different things that will make money for our investors but also be positive for the environment and for people. But we should be doing more and we can be doing more as a country, as a KiwiSaver scheme.”
How much has the KiwiSaver industry changed since Pathfinder started its KiwiSaver in 2019? Berry says a lot.
“I think there's a massive mindset change going on at the moment,” he says.
“For me, the big thing that we're going through at the moment is a mindset, change and acceptance that raw capitalism is not working as well as it should and as well as it needs to, frankly.”
$750 million
In 2019, the same year that Pathfinder launched its first KiwiSaver fund, Berry and Brownsey sold Pathfinder to NZ-owned wealth management company Alvarium.
Berry is still CEO of Pathfinder while Brownsey left his role as Pathfinder’s Chief Investment Officer in February this year.
Alvarium manages just over $2 billion of assets and within that Pathfinder makes up $750 million, inching closer to the $1 billion funds under management (FUM) mark.
Berry says that $750 million is split “exactly down the middle” between managed and KiwiSaver funds, with $375 million currently in each category.
He says Pathfinder has experienced “significant” growth since launching its KiwiSaver in 2019 as then they had $100 million FUM.
Pathfinder also now has nearly 10,000 KiwiSaver members as well.
The next steps for Pathfinder include launching an aggressive KiwiSaver fund and driving more attention to ethical investing in the industry.
“We’re really clear that we want to not only lead in ethical investing, we want to bring the industry with us and we want to change practices in the industry and drive the industry harder,” Berry says.
“We need to keep doing this and we want to do it in a way that gets other people in the industry, the banks and everyone else in the industry excited.”
6 Comments
ESG is outsourcing governance to powerful unelected unaccountabe institutions.
Government should set what is legal and what is not. Investment institutions need to work within the law and focus on return on investment not overlay and impose another set of ideological rights and wrongs.
People who invest to not make money but to feel good about themselves, should really just go give their money to the homeless on the street. It will achieve more. Otherwise, your capital should be deployed into companies that offer the best returns, not those that operate as quasi-charities or place ideologies before shareholder returns. See how well The Warehouse or Synlait that have embraced ESG have performed lately. Look for companies that focus on their business not virtue signalling.
Takes a while for some folk to learn.
Investing-to-make-a-profit, was only possible in the growth phase. That is coming to a halt, and reversing. Indeed, I'd suggest that if folk add in debt with return, growth turned a decade ago.
From here on in, degrowth is the physical reality. If you want to bet that you can outwit others on the sinking ship, fine.
But the bigger question is this: Define Ethical?
And the only answer is: Something which doesn't reduce the chances of future wellbeing.
These folk are miles from that - and you seem to be even further. I've never looked to make money out of money - my conscience doesn't let me parasite like that.
Don't twist the meaning of words, perchance?
There is no such thing as 'ethical performance'.
There is extraction/depletion (from a finite planet), there is rentier behaviour (both horizontally and vertically - meaning now and vs the future.
You are not alone - even the word 'investment' is incorrect. It really means: getting a foot in the door, so an income-stream comes my way. People don't 'in' anything, particularly if it's raw debt.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.