Just a handful of NZ fund managers have earned top grades for environmental, social and governance (ESG) practice from the Responsible Investment Association of Australasia (RIAA).
The latest annual RIAA report on the NZ sector says only eight local fund managers scored the minimum 80 per cent in the industry body’s bespoke ESG scoring system to meet the ‘best practice’ standard.
According to the RIAA report, those managers “clearly demonstrate leading practices of ESG integration in their investment process via their policies, their clearly defined approaches to stewardship, their active ownership (including corporate engagement and voting) and their meaningful disclosures”.
The top-tier NZ managers in the RIAA rankings comprise: AMP Capital; Devon Funds; Harbour Asset Management; HRL Morrison; Mercer; Mint Asset Management; Pathfinder; and, Southern Pastures.
“This is a strong step up from the four managers included in this list in the previous year’s report, indicating a maturity and deepening of ESG practices in the New Zealand market over the past year,” the report says. “The still-small numbers however, suggest that many New Zealand investment managers are yet to provide evidence of a detailed and systematic approach to their commitment to RI [responsible investment].”
RIAA assessed 25 NZ managers against its ESG ‘framework’.
The headline RIAA figures showing a marginal uptick of 3 per cent during 2018 in NZ investment assets managed under RI principles to reach $188 billion – or 72 per cent of the estimated $261 billion “professionally managed” funds in the country.
In a statement, RIAA chief, Simon O’Connor, said: “The latest figures reflect a wider understanding that responsible investing is the foundation of good investment practice. The majority of investors believe that the number one driver of market growth is the strong financial performance of investments that consider environmental, social and governance factors.”
While the bulk of the NZ investment money classed as RI is institutionally-managed – including government and KiwiSaver funds – the report also notes a growing number of retail products are popping up here.
In 2018 RIAA certified 10 new NZ retail funds, bringing the total number of local products under its badge of compliance to 50. The freshly-stamped RIAA NZ products include seven Mercer KiwiSaver funds, two from Pathfinder and one from Booster.
“Together, these ten new funds represent $1.9 billion in [assets under management] AUM and provide further evidence of retail funds flow into responsible investment products,” the report says.
Despite the rapid growth of nominal RI-managed assets in NZ over the last few years, RIAA has yet to produce performance statistics for the market.
RIAA says it abandoned its attempt to measure the NZ RI performance in 2018 after finding that “its source data sample was too small, with inadequate time series data, and hence was statistically unreliable to produce an effective sample”.
However, RIAA says data across the Tasman shows the average RI fund outperformed the overall average Australian shares fund across most time periods up to 10 years. But the average Australian-based RI global shares fund in the RIAA survey underperformed the MSCI World ex Australia index over all but one period.