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Responsible investment rises as market matures, survey finds

Tuesday 9th July 2019

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The level of responsible investment in New Zealand grew 2.5 percent to $188 billion last year indicating the market has matured after two years of rapid growth, says the Responsible Investment Association of Australasia. 

Investment levels nudged up in calendar 2018 compared with a gain of 39.7 percent in 2017 at $183.4 billion, and an even bigger 66.2 percent boost the year before to $131.3 billion, the association's review of 46 New Zealand financial institutions found. 

"The latest figures reflect a wider understanding that responsible investing is the foundation of good investment practice," Responsible Investment Association of Australasia chief executive Simon O'Connor said.

The KPMG-compiled report shows assets managed in accordance with responsible environmental social and governance principles made up 72 percent of New Zealand's total $261.4 billion of assets under management, in contrast with Australia's 44 percent. 

Speaking at the launch of the association's fifth survey on responsible investing, O'Connor said his goal is about maturing the market rather than growing it. 

Those managing funds on a professional basis without regard to environmental social and governance factors would likely later be caught by regulators, O'Connor said. 

The survey showed eliminating sin stocks was the dominant responsible investment strategy, representing 44 percent of funds under management. 

Controversial weapons and tobacco are the most commonly screened-out stocks, while investment managers are also avoiding gambling, nuclear power and adult content. 

The mosque shootings in Christchurch in March put the relevance of investment in weapons manufacturing and distribution into the limelight, the report said.

On a panel of speakers, New Zealand Superannuation Fund senior investment strategist for responsible investing, Arti Prasad, said the industry was "done and dusted" with just using exclusions and that the spectrum of responsible investing has changed. 

She said managers are much more interested in positive impact investing, and this was evidenced in overseas markets such as the US and particularly Europe which is "on turbo-charge" when it came to investing for positive social or environmental impact.

However, the report released today does not have any performance data comparing returns on responsible funds with the mainstream because the source data was considered too small, although O'Connor said the overseas evidence showed that responsible investment meant better returns. 

In Australia, an average responsible investment fund has a return rate of 5.7 percent over three years, and 12.4 percent over 10 years. This can be compared with the S&P/ASX 300 Total Return index's return of 6.7 percent for three years or 8.9 percent over 10 years.


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