As responsible investing becomes more mainstream, investors are asking for more information.
Here are some trends from the Responsible Investing Association of Australasia’s conference, held in Auckland on 18 September.
We’ll vote with our money
A new Colmar Brunton survey for the RIAA and Mindful Money shows that 63% of Kiwis would move their KiwiSaver balance to another provider if company practices don’t match their values.
It also showed that Kiwis want their providers to avoid (in order of importance): Animal cruelty and human rights abuses (both 93%), labour rights abuses (90%), tobacco (83%), gambling (82%), palm oil (81%), military weapons (78%), personal firearms (78%), fossil fuels (76%), junk foods (74%) and pornography (74%).
Barry Coates, of Mindful Money, said the survey showed that responsible investing had moved from being a nice-to-have, to an essential.
Protection against climate change
Insurance companies need to encourage people consider the impacts of climate change, AIG (NZ)’s chief risk officer Martin Hunter told the conference.
As flooding and cyclones become more frequent and more severe, the effects are devastating communities. There’s a need to change behaviours, he said.
Insurers have a role to deal with the residual risk, after buildings have been located in high-risk areas. But people should first consider the effects of developers building on marginal land prone to flooding and climate risk – it’s a concern that we’re not linking these issues together, he said.
Risk-based pricing is a fact. In the future, people will pay more for insurance, he said.
Culture is a factor
Many speakers referred to the Maori cultural perspective of responsible investing, with some speakers adding a C for Culture to the ESG used for the Environment, Social and Governance issues considered by responsible investors.
Dr Robert Joseph of the University of Waikato explained Maori governance and the principle of ‘whai rawa’, or prosperity and wellbeing.
Maori legal systems, he said, were based on relationships with the above, the present, the past, the future, mother earth, resources, and collective organisations.
As a tribal people, Maori rarely came together as one, he said. They had been successful over centuries of trade, bringing prosperity to their people. Now they were now searching for whai rawa in their investment outcomes.
A new Maori fund
Tama Potaka, senior adviser for the NZ Super Fund, said he was part of a process to enable Maori tribes to invest their wealth through a single, front-facing direct investment entity.
A hui and working group were set up to get all the parties talking. The fund’s target was NZ$60 million invested. By October last year and after many meetings, he said just $10-15 million was committed by three parties.
Then over week of the Pacific Islands Investment Forum, the proposed fund suddenly grew to NZ$150 million of Maori investment.
Women and outcomes
Kathryn McDonald, head of sustainable investing at Rosenberg Equities, said research was now showing that among the most profitable companies, having gender diversity brought more profitability.
Research showed that even over the GFC, companies with higher diversity (greater than 20 per cent women) were able to keep up their profitability better than those with lesser gender diversity (less than 20 per cent women).
A more diverse response can engender better brand diversity, she said. The problem-solving of diverse groups was better than homogenous groups and avoided ‘groupthink’.
Financial advisers and RI
John Berry, from Pathfinder Asset Management, said new regulation would be exciting – “we just don’t know it yet”.
The biggest changes would be principles-based advice, not rules-based. In the past advisers would hand over some paperwork and discharge their responsibility to consumers.
A new code of conduct would shift responsibility to the adviser to make that call, by asking what’s right for the client, he says.
In the UK, pension schemes’ trustees now have to consider ESG risks and opportunities. That’s going to happen in New Zealand, he predicted.
Doing good with your money
‘Impact investing’ is one of the lesser-known forms of investing, the conference was told. It’s where there’s social good done by investing in areas where there are good outcomes for society.
One was a community housing project with mainly government-funded tenants in the Bay of Plenty, where investors received reliable yields of 3-4%, with low risk, while delivering a social housing impact.
In another project, investors partnered with the Auckland District Health Board, Kidney Foundation, banks and family trusts to open a relocatable clinic for renal dialysis patients in the Tamaki Regeneration area. The bonds paid a 5% return over 7.5 years.
First published 19 September, 2018
Story by Brenda Ward
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