Ethical investing: survey reveals key messages for advisers and fund managers

Despite concerns about greenwashing, nearly three-quarters of New Zealanders (73%) want their funds to be invested responsibly and ethically, and 56% say they would consider switching KiwiSaver funds if they discovered their fund was invested in companies that were not consistent with their values.

Thursday, April 28th 2022, 7:23AM

by Jenni McManus

Younger investors would be more likely to make the change – 60% of millennials (aged 25-39) and 57% of Gen Z (18-24) compared with only 52% of baby boomers (aged 60-plus).

These are among the key findings from a survey released today by Mindful Money and Responsible Investment Australasia (RIAA). The survey follows similar joint studies released in 2018, 2019 and 2020. All up, there were 1099 respondents, with the data collected through an online survey in late January/early February this year.

From Values to Riches 2022: Charting consumer demand for responsible investing in Aotearoa New Zealand reveals that 50% of respondents are concerned about greenwashing – the making of misleading claims about the ethical standards applied to investments – and 54% say they would be more likely to invest in a fund that was verified and labelled by an independent third party.

Simon O’Connor, CEO of RIAA, says investors and are demanding that their providers can back up their claims. “Consumers have awoken to the opportunity to invest in line with their values but are also much more attuned to cut through the spin to find products that deliver on the most important issues for them.”

The survey also points to what it calls a “crucial” link between ethical investment and savings. If people knew their savings would make a positive difference, 53% say they would be motivated to save more.

About two-thirds of those who do not already have an ethical or responsible fund say they are looking to invest in such a fund in the future. Demand is particularly strong among women (80%) and younger generations (71%) compared with 63% of men.

The researchers say this support comes from a range of income groups, including those on low incomes and with low KiwiSaver balances. “Investing ethically is an issue for all, not just those with high levels of discretionary investment.”

For many of those surveyed, it appears investors are not simply looking for funds that do well but investments that also do good. For 62%, it is important that their investments make a positive difference in the world.

“The survey results are a clear signal to the finance sector that retail investors are looking for KiwiSaver and investment funds that align with their values,” says Barry Coates, CEO of Mindful Money.

“This means avoiding investing in companies that do harm and including investments [that create] positive impacts. As the market continues its rapid growth, there will be opportunities for the fund providers that can respond to these consumer demands.”

There are important messages here for financial advisers. Of those surveyed, 54% expect their advisers to prioritise maximising investment returns and 53% expect them to be knowledgeable about responsible and ethical investing. And 42% expect their advisers to know which products are certified or labelled as responsible by independent third parties.

New Zealanders also expect more information from KiwiSaver or other investment providers. Nearly two-thirds (63%) say it is important they know which companies their KiwiSaver and other funds are invested in. Among Gen Z, 78% believe responsible investing will outperform traditional funds over the longer term.

Key issues of interest to these investors are healthy rivers and oceans (66%), healthcare and public health (70%), sustainable water management (65%) and renewable energy (65%). Half of those surveyed want their fund to reduce emissions and a similar percentage want it to pledge to achieve net zero emissions.

Most would not want their fund to support companies connected with human rights abuses (90%), labour rights abusers (89%), environmental damage (88%) or violation of the rights of indigenous peoples (87%).

Animal cruelty and animal rights issues also figure large. Of those surveyed, 84% want to avoid products tested on animals, caged or crated animals (82%) and businesses connected with animal products (73%).

“The strength of concern over human rights violations was shown in the recent public outrage after revelations that more than a hundred KiwiSaver funds had investments

in Russian government bonds or in companies linked to the Russian government,” Coates says.

“The investment sector should look closely at this survey if they want to be responsive to the demands of retail investors. While most of the investment sector excludes tobacco products and controversial weapons, they ignore concerns about other issues that consumers identify as important.”

O’Connor says investors are refining the ways they can deliver positive change with their investments.

“Beyond divestment, more investors are using their ownership of companies to drive change, from voting at AGMs to engagement, filing resolutions and collaborating for public policy changes.

Leading investors are holding companies to account across a range of issues to ensure they have ambitious plans for a net zero transition, to improve their human rights performance and to strengthen gender diversity. The results of this research are a wake-up call to investment managers to better communicate the results of this engagement to consumers."

Tags: investment