Russell Investments has joined the growing band of managers to specifically exclude controversial weapons manufacturers from its investment universe.
In a note to NZ clients earlier this month, Russell says the change followed a recent review of its environmental, social and governance (ESG) process.
“This has resulted in the exclusion of companies involved in the production of anti-personnel mines and cluster munitions,” the client note says.
The ESG revamp affected the manager’s Global Opportunities Fund (both hedged and unhedged versions) and the Global Bond Fund, the Russell note says.
Alister van der Maas, head of Russell NZ, said the change would bring the Australasian funds in line with the global manager’s European ESG policies.
According to van der Maas, there would be “no material change” to the underlying Russell funds post the ESG update with just a few stocks potentially excluded.
Among other clients, Russell is the underlying manager for the approximately $1 billion BNZ KiwiSaver scheme (excluding the NZ cash portfolio which is outsourced to Nikko Asset Management).
The potential exposure of KiwiSaver investors to cluster weapons’ manufacturers via index funds caused an uproar in NZ this August with a raft of schemes either fast-tracking portfolio clean-ups or switching underlying funds in the ensuing media frenzy.
In one of, if not the, biggest mandate swap of the year (worth about $2 billion), ASB dumped its long-time global equities provider, Vanguard, for BlackRock following the cluster bomb outburst. Last week Vanguard released its new screened global equities fund to the Australasian market with a number of KiwiSaver providers including Booster (which tipped in about $400 million) and Simplicity signing on.
Van der Maas said any material changes to underlying funds – including ESG-prompted ones – should be clearly explained to investors beforehand.
“There needs to be a level of education about material changes to the underlying investments, rather than managers just making broad exclusions,” he said. “After all, the money belongs to the investors not the managers.”
There was also little consistency in the NZ funds industry about what was considered ‘material change’ and would therefore require disclosure, van der Maas said.