The rise and rise of responsible investing
During this time of uncertainty nothing is certain, but it’s pleasing to see the growth and demand continue for responsible investing.
This week I attended the New Zealand launch of the Responsible Investment Benchmark Report 2016. Now in its 15th year, this report is the most comprehensive review of the responsible investment sector in Australasia, and I congratulate Simon O’Connor, the Chief Executive of the Responsible Investment Association Australasia (RIAA) and his team for the robust reporting on the responsible investment industry in New Zealand and Australia.
The report shows there has been a significant shift year on year into responsible investment as environmental, social and governance (ESG) factors are increasingly being recognized as key investment risks to manage. What’s really exciting from a New Zealand market perspective is that not only is responsible investment continuing to grow, but consumer demand is also starting to take off.
This year’s New Zealand report shows the amount of assets being invested responsibly in New Zealand has grown 28 percent in the past year to $78.7 billion. The vast majority ($77.1 billion) of this investment is being driven by institutional investors, such as Crown financial institutions, fund managers and community trusts. However, ‘core’ responsible investment – categorised as ethical or socially responsible investment at the retail end of the market (including KiwiSaver products) – also grew strongly. Although only a small proportion of the total market, core responsible investment increased by 18% over the year to $1.6 billion, reaching 2.6% of total assets under management in New Zealand.
One myth surrounding responsible investment is that returns are weak compared with other mainstream funds. The reality is returns are competitive and there is no reason to believe that this trend will not continue. The companion Australian Responsible Investment Benchmark Report 2016 backs this up by showing very strong performance of responsible funds against their benchmark index and the average of equivalent mainstream funds. For example, core responsible investment Australian equities funds outperformed both the ASX300 index and the average large cap Australian equities funds across one, three, five and 10 years.
There is no doubt that responsible investment isn’t a passing trend and integrating ESG factors is becoming more mainstream. Investment managers such as ourselves are taking our responsibility as asset owners very seriously on behalf of our clients and being an active owner. As a signatory to the Principles for Responsible Investment (PRI) since 2007, and in line with our ESG philosophy, we are committed to extending responsible investment and ESG integration activities across all asset classes. We believe that it is not a question of whether you should invest responsibly, but whether you can afford not to.
As part of Benchmark Reports for both New Zealand and Australia, RIAA evaluates fund providers against a framework of leading practice in ESG integration. This includes criteria such as being able to clearly articulate and demonstrate a systematic process for ESG integration, as well as having policies, detailed disclosures, a clearly defined approach to stewardship and active ownership that included engagement and voting. It was pleasing to see that AMP Capital is one of 15 managers noted in the Australian report that scored above 80% in RIAA’s assessment, and in New Zealand we were joined by HRL Morrison, Southern Pastures LP and Harbour Asset Management.
At AMP Capital we are seeing an increasing appetite for responsible investment funds as investors seek funds that are aligned to their values and investment beliefs. At the same time, the nature of responsible investment funds appeals to a broad universe of investors across the demographic spectrum. At one end we are seeing the older generation interested in how they are investing, as there is concern about the world that is being left for future generations and how their legacy is invested. At the other end we are seeing demand from ‘millennials’ who are concerned about how their money is invested and what type of companies they have exposure to. The increased transparency and the publicity for divestment campaigns around fossil fuels and poor governance in the headlines (eg Volkswagen) is also helping raise the profile of responsible investment. What is great for investors is that the market is growing, which gives people more choice with regards to product providers.
This year’s Responsible Investment Benchmark Report highlights that a responsible and ethical approach to investment continues to play an ever increasing part in what investors are demanding and asset managers are delivering. View the full copy of the RIAA Responsible Investment Benchmark report
for all the detail.
For further information on AMP Capital’s responsible investment philosophy and range of responsible investment funds, please visit the responsible investment section
of our site.
Also, from this week, AMP KiwiSaver Scheme customers now have the option to invest responsibly with the addition of the AMP Responsible Investment Balanced Fund. Visit the AMP website
for more information.
A copy of the Product Disclosure Statement can be obtained from the AMP Capital Investors (New Zealand) Limited website www.ampcapital.co.nz, by contacting the Client Service Centre on 0800 400 499, or by visiting the Disclose website www.business.govt.nz/ disclose. The Manager and the Issuer of the Fund is AMP Investment Management (NZ) Limited, Ground Floor, 113-119 The Terrace, Wellington.
This blog post has been prepared to provide general information and does not constitute 'financial advice' for the purposes of the Financial Advisors Act 2008 (Act).
An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice.
While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate,
complete or timely and do not make any warranties or representations in respect of results gained from its use.
The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP.
These views are subject to change depending on market conditions and other factors.
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