Australasia was one of the standout regions for increasing responsible investments (RI) over the two years to December 2015 in a period where the pace of growth in the sector globally slackened, a new report shows.
According to the ‘2016 Global sustainable investment review’ released last week, Australasia grew RI assets by almost 250 per cent during the two-year stretch – about 10-times the overall global growth rate of 25 per cent.
New Zealand alone saw annual growth in the RI sector of 28 per cent in the two years to end December 2015, reporting total funds under responsible management of US$53.5 billion at the close.
Japan was the fastest-growing RI region (up almost 6,700 per cent, albeit from a low base – increasing assets from US$7 billion to US$474 billion over the period.
“At the start of 2016, global sustainable investment reached $22.89 trillion, compared with $18.28 trillion in 2014, an increase of 25 percent,” the report says. “Previously, global sustainable investment assets grew 61 percent from 2012 to 2014.”
Despite the drop-off in global RI growth most regions – with the exception of Asia (ex Japan) and Europe – bumped up the proportion of responsibly-managed assets relative to their respective total markets with Australia and NZ again outperforming in this metric.
“Responsible investment assets managed by asset managers, asset owners, banks and advisors in Australia and New Zealand grew substantially, both at retail levels and institutional levels, across all responsible investment strategies,” the study says. “In both countries combined, responsible investment assets have grown from 2014 to 2016 to reach $515.7 billion, and to a point where in Australia, sustainable investments now account for 50 percent of all professionally managed assets.”
Overall, the proportion of RI assets compared to the total investment universe measured in the report fell from 30.2 per cent as at the beginning of 2014 to 26.3 per cent in the latest report – dragged down by a decline in the European figure (from 58.8 per cent to 52.6 per cent) where new tighter definitions of sustainable investing were introduced.
The study, published by the Global Sustainable Investment Alliance (GSIA) – covering RI-focused member organisations in many jurisdictions including Australasia – says demand for responsible investing in Australia and NZ was increasing “both at retail levels and institutional levels”.
“Consumer demand continues to surge and investment organizations are moving to meet this demand, developing products and options across all asset classes and all investment styles,” the report says.
Meanwhile, last week AMP Capital released the 2017 ‘Corporate governance report’, including further detail on its recent move to cut all exposure to certain companies on ethical grounds – with tobacco and ‘controversial’ weapons manufacturers the first to get the heave.
In the report, Ian Woods, AMP Capital head of ESG research, says the fund manager’s first duty was to “look after our clients’ funds to the best of our ability”.
“In doing so we consider it prudent that we articulate the principles by which we discharge this responsibility, especially as we have decided to exclude some companies on ethical grounds in some certain and exceptional circumstances,” Woods says in the report. “We acknowledge there are challenges and ramifications associated with excluding certain companies. Our clear Responsible Investment Framework, however, provides clarity, transparency and predictability to our approach.”
The AMP Capital report also reveals the group’s underlying NZ equities manager, Salt Funds Management, approved 97 per cent of the 280 board resolutions it fielded during 2016.
Salt “voted against 2 percent [of board resolutions] and abstained from voting on 1 percent”, the report says, based on concerns about electing directors and payments to non-executive directors.
Votes in other NZ asset classes were subsumed in broader AMP Capital statistics including global listed property and infrastructure funds.
Across its entire global portfolio, AMP Capital voted against some 390 company resolutions with 68 of the ‘no’s’ cast in China, 62 in Australia and 40 in the US.