Three-quarters of New Zealanders continue to expect their KiwiSaver and managed funds to be invested ethically and responsibly despite international and domestic criticism of environmental, social and governance (ESG) frameworks.
This is according to new research out of ethical investment charity Mindful Money and the Responsible Investment Association of Australasia (RIAA). They say peoples' focus is shifting from merely avoiding harm in their investments to actively looking at how they can create positive impact.
Mindful Money and the RIAA undertake an annual survey of views on ethical investment, with this year’s survey being undertaken by 1,000 New Zealanders in February.
This year’s survey found, among other things, that 75% of respondents want their KiwiSaver or investment fund to be invested ethically and responsibly.
Mindful Money co-CEO Barry Coates said the survey showed New Zealanders want to know their money is being invested in line with their values.
“We look at the political criticism of ESG with some amazement because when you actually look at what's happening in the financial system with the use of tools like that, they're looking at how environment, social and governance factors will affect the value of the company that they invest in,” he told interest.co.nz.
“Its a form of risk management, not a woke activity.”
Half of the survey respondents were concerned about misleading claims in investments, with 54% of people more likely to choose funds with independent certification, while 66% want to know which companies are in their portfolio.
RIAA co-CEO Dean Hegarty said this response was a sign more needs to be done.
“Trust is something that's really critical when it comes to investments and we're not at a point where people have got total confidence in what's sitting in their funds,” he said.
However, Hegarty told interest.co.nz discussions the RIAA has had with investment managers have shown investment managers have their own concerns about greenwashing. He said asset managers in NZ see it as the single biggest barrier to growth.
“That speaks to the fact that we are in NZ at a point where we don't have clear regulation on this. I think there's certainly a role the Government can play in that, but also the regulators could be providing much clearer guidance around what their expectations are,” he said.
“So that those who are operating in the industry, like the fund managers, can have confidence and then hopefully they can start to translate and communicate that through to consumers and retail investors.”
Almost half – 45% – of survey respondents expected ethical and responsible investments to perform better in the long term compared to only 11% of respondents who disagreed.
Mindful Money and RIAA said this showed New Zealanders don’t perceive there to be a “trade-off” between ethical investing and earning good returns from their investments.
“There's a strong feeling that actually this is not only good practice for social environmental issues, good practice financially and good for long term returns,” Coates said.
“So that's borne out by huge weighted evidence now that ethical investing is at least as good returns over the long term as conventional investing, skewing on the upside in terms of returns.”
Over three-quarters of survey respondents – 76% – said they would invest in a fund that creates positive benefits for society and the environment, with 60% seeking comparable returns, and 16% willing to accept lower returns.
The report found 27% of those in the Gen Z age cohort (aged 29 and under) would be willing to accept a return lower than the industry benchmarks.
Gen Z are particularly concerned about fossil fuel investments, While baby boomers (aged 59 and over) are most concerned about tobacco, adult entertainment/pornography and animal cruelty.
Around 75% of respondents in the survey said they considered it important for their fund managers to reduce the level of financed emissions in their portfolios.
Respondents also wanted fund managers to set targets for further reductions and commit to net zero emissions by 2050.
This is a challenge for most investment providers, the report found.
“While some investment providers have started to report on their current emissions in Climate-Related Disclosure reports there are only a few with emissions reduction targets and commitments to net zero,” it said.
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