Most KiwiSaver investors favour engagement rather than divestment of troublesome stocks, a new survey commissioned by the Responsible Investment Association of Australasia (RIAA) has found.
Over 40 per cent of the 1,001 respondents said that “exercising rights as a shareholder is more likely to influence a company’s behaviour than selling the investment”, according to the survey, released last week at the annual RIAA NZ conference.
“… just one in five believed that selling the investment would be more likely to have an influence,” the RIAA report says.
However, the survey uncovered a large undecided vote with 39 per cent “unable to offer an opinion either way”.
Simon O’Grady, chief investment officer of the government-owned Kiwi Wealth, which sponsored the RIAA survey, said the findings showed New Zealanders had “a strong preference for fund managers to be active shareholders, positively influencing company performance through active engagement rather than just divesting”.
The survey was carried out by Australian market research firm, Mobium, early in October following media scrutiny of potential KiwiSaver scheme exposure to cluster munitions manufacturers via passive global equity funds.
In the wash-up, Vanguard Australia developed a cluster-screened global equities index fund for Australasian investors, signing up a number of KiwiSaver schemes to the new product. However, Vanguard also lost its biggest NZ client in the ensuing media crisis with index rival BlackRock picking up the ASB passive global equities gig with close to $2 billion understood to have shifted homes.
Overall, the RIAA NZ survey found that a convincing 95 per cent of respondents “believe that it is of at least some importance that KiwiSaver funds consider environmental, social, governance and/or ethical factors”. More than 80 per cent also rated the issue as half-way or more up the scale of importance.
While the results indicate a latent demand for ethical investment options in KiwiSaver, the survey also found a few barriers to growth in the sector.
“More than half of all respondents agreed that they do not have enough time to look at all the options and compare them, or that there is not enough independent information available,” the RIAA report says.
The potential higher cost of responsible investment funds showed up as a relatively minor issue for respondents (29 per cent rating it as an influencing factor), albeit that almost 60 per cent were uncertain either way.
Close to 40 per cent of those surveyed also said they didn’t have enough money in KiwiSaver to make switching to responsible investment options worthwhile.
“The low member balances relative to more mature systems (e.g. Australia) may present a barrier to deeper engagement on these issues,” the RIAA study says.
Just 2 per cent of respondents reported KiwiSaver balances of $75,000 or more with the vast majority (66 per cent) having $25,000 or less in their accounts.