Help the world and your pocket
Investors are being told it’s a myth that putting their money into socially and environmentally-friendly investments will cost them.
The amount of New Zealanders’ money invested in negatively screened funds – those that avoid certain investments, such as tobacco or land mines – increased 2500 per cent last year, to hit $42.7 billion.
But some investors are still reluctant to shift their money to responsible options – assuming that to do so would cost them returns.
Chief executive of fund manager Pathfinder John Berry said there was a ‘‘generational divide’’ at work – young people were increasingly interested in where their money was going.
His business has launched the Pathfinder Global Responsibility Fund, which uses best practice responsible investment frameworks, incorporating environmental social and governance (ESG) factors into its stock selection and ownership practices.
It will also be offered via Sharesies, the online platform that allows investors to put small amounts of money into shares.
The fund will invest in 250 stocks, excluding manufacturers of cluster munitions, anti-personnel mines, tobacco, nuclear weapons and whale meat.
Companies that generate revenue from gambling, tobacco, controversial weapons, pornography and thermal coal will also be excluded – along with companies whose investments are generating ‘‘significant controversy’’.
’’Many New Zealand fund managers’ responsible investment practices extend only to the exclusion of companies in a narrow range of sectors,’’ Berry said.
‘‘Many do not see the need for responsible investment to go further. They regard environmental, social and governance factors as only relevant to specialist funds rather than having broad appeal. Sometimes managers almost describe responsible investment as an afterthought.
‘‘We don’t think that goes far enough. We believe the investing public expects a more proactive, common-sense approach that is positive and goes beyond simple exclusions.’’
He said funds that were screened for ESG factors had the potential to deliver returns that were as good as or potentially better than other global portfolios – and it was a myth that investors had to be willing to sacrifice returns to do good with their money.
Christopher Douglas, head of manager research in this region for research house Morningstar, said there was a grain of truth in the negative perception.
Purely exclusionary screens – broadly screening out ‘‘sin stocks,’’ for example – could have a negative impact on a portfolio.
But Morningstar said very few modern sustainable and socially responsible funds used exclusionary screening so extensively that it severely limited the available universe of investments.