Pathfinder Asset Management has signaled a further push into the socially responsible investment market after hiring global environmental, social and governance (ESG) specialist, Sustainalytics, as research partner.
John Berry, Pathfinder director, said the Auckland boutique fund manager would initially use Sustainalytics – via the group’s recently-opened Sydney office – to screen its Global Water Fund.
Berry declined to comment on the prospect for further ESG-tinged product launches on the back of Sustainalytics research.
However, he said “socially responsible investing is an area we are particularly interested in”.
According to Berry, to date NZ fund managers have typically been reactive in the ESG space – for example, following the recent KiwiSaver cluster bomb exposure ruckus – rather than forward-thinking.
He said globally the ESG debate has moved beyond simply cutting exposure to revenues from controversial industries such as cluster bomb manufactures or tobacco to deeper issues of corporate behaviour.
“We need to be thinking about where the socially-responsible investment [SRI] market will be in two or three years,” Berry said.
Furthermore, he said fees on SRI funds in NZ, which tend to be higher than traditional products, would also have to reduce to attract greater market share.
“If SRI funds combine lower fees, the same investment process as conventional product and robust ESG screening, then they become very, very compelling for investors,” Berry said.
For the time-being, Sustainalytics would help Pathfinder screen the roughly $10 million Water Fund for exposure to revenues from gambling, tobacco and controversial weapons as well as rating the currently 59 companies in the portfolio on environmental and labour and corruption records.
While Pathfinder previously carried out ESG research in-house, Berry said the relationship would take the process to “the next level”.
In a statement, Sustainalytics CEO, Michael Jantzi, said the firm was “honoured” to provide ESG rankings and screens for the Pathfinder Water Fund.
“Water scarcity is an important sustainability theme given the stresses placed on our renewable water supply,” Jantzi said in the release. “We applaud Pathfinder for focusing on this critically important issue, and we look forward to working with their team over the long term.”
The Water Fund has returned about 12 per cent per annum after fees over the last five years.
Pathfinder collectively manages more than $120 million across its current product suite of four funds.