New Zealanders have given more weight to returns over non-financial factors in selecting investments compared to last year, according to a new study.
However, the joint Responsible Investment Association of Australasia (RIAA)/Mindful Money (MM) annual survey also found a slight rise in the proportion of those who believe sustainable-type strategies will outperform over the long term.
“The survey reveals concern over financial returns during a volatile market,” the RIAA report says. “The factors that are important to the public in choosing an investment have swung more towards financial issues over social and environmental issues compared with last year.”
At the same time, about 45 per cent of respondents expect responsible investments will deliver better long-term returns, representing a year-on-year increase of 5 per cent.
“There is still a large number of respondents who say they aren’t sure (45%) whether returns are higher and 10% who say they do not agree that ethical or responsible funds perform better over the long term,” the report says.
Roughly three-quarters of the 1,000 or so respondents agreed that investments should be responsibly managed, although more than half could not clearly define the concept.
“There is still uncertainty about what ethical and responsible investment means, especially amongst millennials,” the RIAA study says.
In the ‘gen Z’ age group (18-28) 70 per cent of respondents either had not heard or responsible investing or were unclear of its meaning: just under half (45 per cent) of baby-boomers (over 59 years) said the understood responsible investing.
“The introduction of regulatory standards and mandatory reporting (as is the case in a growing number of countries) would also help create greater awareness and clarity about what the terms ‘ethical and responsible’ investment mean,” the report says.
Among a raft of other findings, the RIAA/MM report found a steady year-on-year level of skepticism around ‘greenwashing’ with about half (49 per cent) worried about the practice.
“This is a particular concern for Millennials, those with a university degree and those with low investment balances,” the study says. “This lack of trust in claims that funds are ethical, responsible, sustainable or positive impact is of concern to regulators internationally, with court cases or fines in Australia, the US, EU and other countries.”
Coincidentally, in a think-piece published last week, Financial Markets Authority (FMA) executive director response and enforcement, Paul Gregory, notes the regulator would continue to clamp down on perceived greenwashing breaches in the local funds management sector in the wake of 2022 review.
“The FMA is sharpening its focus in this area and there are broader policy and consumer tailwinds for claims to be articulate, accurate and meaningful,” Gregory says. “Mandatory climate-reporting standards are here, broader sustainability standards are in the wings. Consumer expectation is growing. Fund managers can add substance to support their claims and labels and disclose accordingly, or stop using the claims and labels. Marketing without underlying substance won’t wash, green or otherwise.”
The RIAA/MM online survey of 1,008 New Zealanders was carried out over late February to early March this year using the Dynata NZ database. Dynata is a global company providing access to verified, ‘first-party’ data designed to “deliver the actual voice of the individual at scale to market researchers, marketers and advertisers”, the group’s website says.