Conscience drives KiwiSaver revolution
Public pressure has led providers to exit the likes of tobacco and arms companies
The move by KiwiSaver funds to exit investments in tobacco and controversial weapons has led to a massive spike in the amount of money invested responsibly.
Investment by funds that screen out the nasties has grown from $1.6 billion to $42.7b in the past year, according to the latest Responsible Investment Benchmark report.
Simon O’Connor, chief executive of the Responsible Investment Association Australasia, said the switch by the majority of New Zealand’s KiwiSaver providers was one of the most significant global changes to happen to the sector.
“This is a staggering increase and is a monumental development for New Zealand’s financial markets.
“We have never seen a market switch so rapidly to responsible investment. It’s one of the most significant global changes to happen to the sector in 2016 and highlights that New Zealanders are not prepared to build their retirement savings at any cost.”
KiwiSaver providers made the change after a public outcry following reports by the Herald and Radio New Zealand highlighting the level of investment in tobacco, cluster bombs and landmines.
O’Connor said Kiwis had communicated clearly that they were not willing to make money at the expense of the planet or its people.
“Consumers and investors alike are taking a stance and aligning their investments to their values.”
But investment managers could be doing more when it came to positively choosing where to invest money rather than just taking an exclusion approach, he said.
“For us it is not just about getting more and more fund managers to do negative screening. Where we are moving globally is [that] where people choose to invest is even more important.”
O’Connor said more investment was starting to be done through taking a environmental, social and governance approach.
“We are starting to see capital move towards more sustainable investment.”
The New Zealand Superannuation Fund used this approach as well as some investment managers such as AMP. But more could be done. O’Connor believed there was a great opportunity for KiwiSaver providers to engage with their members on what they wanted.
“I think consumers get excited by the positive impact their investment can have. The connection through a responsible investment approach is a great way to get deeper engagement.”
O’Connor said a big driver of the growth was consumer demand and interest but there remained some deep-set beliefs that such an investment approach would have a detrimental impact on returns. But he said research by his association and Harvard proved that was not the case.
Consumers and investors alike are taking a stance and aligning their investments to their values. Simon O’Connor Responsible Investment Association Australasia