Advisers slow to switch on to responsible investing: RIAA

Financial advisers are still unconvinced about the merits of responsible investment principles despite growing consumer interest, the Responsible Investment Association of Australasia (RIAA) says.

Friday, August 14th 2015, 6:00AM

by Susan Edmunds

RIAA released its latest annual report on responsible investment yesterday. It was the 14th it has produced but the first time New Zealand was given a standalone report.

It found that more money was being invested in responsible investment portfolios through KiwiSaver, superannuation funds, fund managers and advisers in this country.

Responsible investing included those that used screening, sustainability-themed investing or community and impact-aware investment strategies.

Core responsible investments, referred to as ethical or socially responsible investment (SRI) funds, recorded growth of 19% year-on-year to $3.2 billion in New Zealand in 2014. Half of that growth was returns and the other half in-flows.

That represents 4% of total FUM, compared to 2.5% in Australia.

Responsible investment funds return an average 9.1% per year over the past 10 years, compared to 7.4% from the S&P/ASX300 accumulation index.

RIAA chief executive Simon O’Connor said growing consumer confidence was driving the trend as investors started to realise that they could achieve good returns while aligning their investments with their beliefs and values.

“2014 has seen a rising interest in how the retirement savings of New Zealanders are invested. Consumers in ever greater numbers are awakening to the fact that you can invest prudently and profitably without compromising your values which is resulting in the growing retail interest in responsible investment,” he said.

Much of the increase in interest was from charities and high-net worth investors, he said. A number of KiwiSaver providers were offering responsibly invested products, but on a small scale, he said. But he said that was likely to grow as investor awareness increased.

“For institutional investors, whilst rising consumer interest is playing a part in driving take-up of responsible investment, this is being helped by environmental, social, governance and ethical factors proving themselves to be ever more important drivers of investment outcomes – with numerous recent examples globally of companies losing shareholder value from mismanaging ESG factors.”

But O’Connor said there was work to do to prove to advisers that the idea that responsible investments would under-perform was a myth. “We hear from investors whose financial advisers have told them it’s not a good idea for them to do with their money.”

Matthew Mimms, of the Investment Store, said very few advisers in New Zealand were proactively involved with responsible investing.

He said it could be argued that AFAs had an obligation under the suitability standard in the code of conduct, to ensure that the investments they recommended matched clients’ values and principles.

The NZ Super Fund and ACC made up 86% of responsibly invested funds.

Tags: responsible investing