Specialising in responsible investment

Advising on responsible or ethical investment takes time and dedication so financial advisers Chelsea Traver and Mike Ross decided to specialise in it.

Thursday, January 19th 2023, 9:00AM

by Andrea Malcolm

They set up Wellington-based Evergreen Advice, a fee-only investment advice firm, in 2021. Before this they worked together at Trustees Executors developing its responsible investment philosophy and first social responsibility product.

“We worked with five financial advisers to create the product and encouraged them to ask every new client if they wanted to invest responsibly. Around 75% said yes which wasn’t what the advisers were expecting,” says Traver. “We decided what funds to use, and almost as important, how to explain it all to the client in a way which was clear and truthful.”

Through that process Traver realised sustainable investing was an area she was passionate about. Another major lesson was that it required time and commitment so when Traver and Ross set up their own financial advice company, they decided to specialise. They joined the RIAA (Responsible Investment Association Australasia) to access educational resources and became RIAA certified. “A benefit of that is we are listed on the Mindful Money website and we’ve started getting some clients filtering through from there.”

On marketing Evergreen, Traver says she and Ross take a considered approach over use of labels like ‘responsible’ and ‘ethical’ investing. “First and foremost, we’re an investment business and we adhere to prudent investment principles - for us that means low cost and broad diversification.

“There's a lot of debate about terminology - it’s a hot button issue - and there are so many accusations of greenwashing in the industry overall, so it’s something we look at consistently to make sure we’re on the right side of things. When marketing, we usually stay towards the responsible investment side of things rather than going to full ethical investment. A very simple definition of responsible investing is that it factors in people, society and the environment along with financial performance. And that’s what the core of our portfolio does, but if a client were to look at our investment options they would consider us ethical. We have recently developed a deep green portfolio, which goes further into the ethical space, and that’s for people who are actively looking at solutions in an impact-type investment.”

Traver says educating clients is a major part of the role. “People want to do good but don’t know what is out there. Also, the tough thing about RI is the nuance. For example a company like Tesla was once an RI darling but they don’t do well on human rights and social issues and have been cited on labour issues.”

She says as well as the broader issues in the industry, clients want to know what fund managers are doing to reduce carbon, and how they engage with companies in their portfolios, down to what issues they’ve voted on. With this in mind she wants to see more specific and transparent reporting from the fund managers especially on issues beyond carbon.

“We’re hammering our fund managers on reporting so we can provide that back to the client. Carbon intensity, scope 1, 2 and 3 emissions, is the base level we would expect. We look at ESG scores from fund managers, how the company compares to the market and also case studies of how they have been engaging with companies in their funds. Engagement is one of the biggest pieces of RI and it’s important we have clear examples to show to our clients. We also use case studies.”

Evergreen has dropped funds that weren’t ethical enough but more specifically because there were better funds available. “Five years ago a lot of fund managers were looking at negative screening only. Now there is a lot more sophistication and we’re getting more ethical funds available in New Zealand. So we have changed out some of our investments.

“I wouldn’t say that RI has changed the relationship between financial advisers and fund managers. In the past you might have asked questions hedging or how much cash was in the portfolio. Now it’s around ESG issues.”

Tags: ESG