The NZ arms of many Australian-owned fund management groups are steering an independent line on socially responsible investing (SRI), head of the sector’s peak Australasian body says.
Simon O’Connor, Responsible Investment of Australasia (RIAA) chief executive, said a number of Australian-parented NZ fund managers – including BT/Westpac, AMP, ANZ, BNZ and Mercer – have kept local control of environmental, social and governance (ESG) policies.
“Notably, those (NZ) domestic organisations are formulating their own ESG approach rather than using one handed down from their Australian owners,” O’Connor said. “It’s pleasing to see them doing it on a NZ basis.”
O’Connor, in Auckland and Wellington last week to launch the latest local version of RIAA’s annual ‘Responsible investment benchmark report’, said NZ had experienced astonishing growth in the sector over the year – probably unmatched anywhere, ever.
The RIAA survey found ‘core responsible investment’, where managers use at least one strategy such as screening out securities, in NZ jumped more than 2,500 per cent in the year to December 31, 2016
“We have never seen a market switch so rapidly to responsible investment,” he said in a statement. “It’s one of the most significant global changes to happen to the sector in 2016 and highlights that New Zealanders are not prepared to build their retirement savings at any cost”.
Proportionally, core SRI coverage in NZ increased from 2.5 per cent of ‘professionally-managed’ assets to over 60 per cent during the annual period, the RIAA report says, driven mainly by “the rapid response by KiwiSaver providers to put in place negative screens across tobacco and controversial weapons”.
However, ‘broad responsible investing’– which focuses on ESG integration – still represents the biggest SRI approach in NZ, applied to almost $90 billion of assets (largely via Crown financial entities).
The study found Harbour Asset Management, HRL Morrison, and Southern Pastures are applying “a leading approach to ESG integration” in their approaches to broad SRI
“In addition, assessed as part of the Australian companion Benchmark Report, AMP Capital were also assessed and included as applying a leading approach to ESG Integration,” the RIAA study says.
While O’Connor said the SRI changes have primarily been pushed through at the institutional level, consumers were starting to engage with ESG issues, helped along by more products in the market.
The RIAA survey found the number of NZ managers with core responsible investment strategies had increased from 12 to 21 as the number of underlying SRI products almost doubled from 27 to 51.
According to the report, the increase in NZ SRI offerings suggests “product development is addressing one of the barriers” to growth in the sector.
“More work is needed to publicise the relative performance of RI Core funds versus equivalent mainstream funds and to engage stakeholders and influencers on the basis of misplaced perceptions,” the survey says.
The current report only includes a performance review of Australian SRI funds, citing the small sample size in NZ as a barrier to effective analysis.
O’Connor said the RIAA planned to provide a dedicated performance of NZ-based SRI funds next year given the increase in funds under management and product range.