Fund managers, Mindful Money look for ways forward

Mindful Money, a website that allows consumers to compare the portfolio holdings of KiwiSaver and managed funds, has met with fund managers to find an agreed approach on how it rates funds for mindfulness.

Tuesday, March 7th 2023, 6:07AM

by Andrea Malcolm

Members of Boutique Investment Group (BIG), a forum for New Zealand’s non-bank fund managers, and Mindful Money CEO Barry Coates came together to discuss the “vexing question” of how to provide investors with “good information about how their money is being used from an ethical perspective.”

Mindful Money, a charity that makes the information available to the public as a free service, uses a set of criteria to rate how “mindful” funds are. However there has been some frustration in the industry that Mindful Money’s ‘companies of concern’ net is being cast too wide in some cases and there is no mitigating information made available to retail customers.

In a joint statement BIG chair and Nikko AM general counsel Simon Haines and Coates say surveys show that New Zealanders want to know where their funds are invested. But this is not the whole story.

“There is plenty of room for different actors with different perspectives to misunderstand each other. We don't have a common vocabulary. There are no accepted standards for disclosure. We approach issues of concern in different ways (and we all think our way is the right way), and we often have different views on whether a particular activity crosses into being a matter of public concern or not.

“It is not uncommon for the Mindful Money website to show portfolio holdings that fund managers consider do not tell the full story, especially when fund managers engage with those companies to improve their environmental, social and governance (ESG) standards.”

One idea being explored is that Mindful Money gives the fund manager the opportunity to respond when it identifies stocks of concern in one of its funds. An example would be a portfolio holding for animal testing that only carries out animal testing because it is legally compelled to by the export market such as China, and is otherwise actively campaigning to end animal testing.

Mindful Money has identified such companies because much of the public does not support animal testing (for non-medical reasons), even under these conditions, especially since many cosmetic companies are choosing not to sell their products to China.

The suggestion is that the fund manager would be able to explain their position on the Mindful Money website.

BIG and Mindful money hope the “dialogue would enable customers to understand why there are differences between Mindful Money and the fund manager, and it is not because either side is attempting to mislead. This concept is subject to being workable from a technical perspective and so is likely to be a few months away.

In order to extend the range of information on ethical investment, Mindful Money is also consulting on how it can incorporate investment practices such as how fund managers undertake stewardship and engagement, whether they invest in companies that generate positive benefits and their actions to reduce climate emissions and build resilience.

The parties say longer term, they are also thinking about whether they can move toward more commonality in our use of language. “It may be helpful to advance this outside of regulatory processes in order to provide the terminology that is both relevant to investment practices and understood in the wider world.”

Tags: Mindful Money