THE BUSINESS CASE
Sovereign Insurance chief executive Charles Anderson says he wants to get his company’s $2 billion investment fund more in line with its liabilities. He’s reviewing the way its index is constructed, to for example lower its exposure to carbon. He wants it managed passively, to reduce brokerage and trading costs, and to reflect the sort of values an insurance firm should model. Anderson, who was one of the few New Zealand executives to attend last year’s Rio+20 climate summit, says it’s clear the world’s resources are being used at a rate that is totally unsustainable. “If you have family and are interested in a forward view of the world, you have to recognise something has to change,” he says. “There is no sense for us to feel good about investing in things we know have negative medium or long-term consequence. It’s particularly crass to do it simply on the basis you could make a better financial return if you do that.” He believes it will make for better long term returns. “It’s a fundamental ability of business to read the signals from the environment they are operating in and transform their models. “If you look through an investment lens, companies that are actively factoring in to their business models these sorts of environmental, social and governance issues are positioning themselves to perform better in future than people who aren’t.” Sydney-based Hunter Hall is the largest fund in Australasia dedicated to responsible investment, with $1.2 billion under management Its head of responsible investment research, Michael Walsh, says when Peter Hall launched the company in 1994 there were few ethical funds around. It is now an industry, with benchmarks, research, guidelines, international standards that funds can sign up to. “I think there are two core objectives in this space. The first is to align investments with the way people align their values in life – they may not like gambling, drink alcohol in moderation, care about the environment, they don’t want people to be treated cruelly,” Walsh says. “Investment can also influence capital markets for good. There is debate in accounting and capital markets about companies not picking up the bill for the environmental consequences or their activities.