The Responsible Investment Association of Australasia (RIAA) has called for a “cohesive framework” in NZ for naming funds marketed as ‘sustainable’ and the like.
According to a new report based on a survey of 1,000 New Zealanders, accurate fund branding could help dispel so-called ‘greenwashing’ concerns that has proven one of the main barriers to growth of environmental, social and governance (ESG) investing here.
“International standards around labelling for terms such as ethical, responsible, ESG, green, sustainable and impact are being introduced,” the report says. “New Zealand needs develop a framework that builds investor and consumer confidence and trust, as well as attracting international investment.”
The study – also supported by Mindful Money and, for the first time, the boutique advisory firm, Moneyworks – comes in the wake of several high-profile greenwashing cases across the Tasman where Mercer, Vanguard and Active Super copped fines collectively amounting to almost A$35 million.
Last week German funds management house, DWS, was fined €25 million for dubious ESG claims on some funds. The Deutsche Bank-owned manager has already coughed up US$19 million to the US regulator over the breaches.
Simplicity uses DWS as its main third-party manager for global assets, although in products not affected by the case.
In a note published last week, legal firm, Bell Gully, said these “significant penalties serve as a reminder to New Zealand fund managers, KiwiSaver providers, and other financial service providers of the need to ensure compliance with fair dealing rules when making claims about ESG funds”.
“The risks for New Zealand financial service providers have been further highlighted by the FMA’s recent censure of Pathfinder Asset Management for online statements about its KiwiSaver funds’ ethical investments,” the note says.
But Bell Gully also highlights an initiative by the government and the Centre for Sustainable Finance to create a ‘Sustainable Finance Taxonomy’ that may reduce greenwashing risks.
Regardless, the RIAA survey found ongoing demand for ‘ethical’ investment in NZ despite the greenwashing concerns and offshore developments that have seen many asset managers back away from global compacts such as ‘net zero’ commitments .
“Three quarters of survey respondents want their investments to be managed ethically and responsibly, and a large proportion of those would consider switching their investment provider if their investments do not align with their values,” the report says.
Dean Hegarty, RIAA co-chief, said in a release that the greenwashing concerns identified in the ‘Voices of Aotearoa’ survey also chime with findings in the industry body/product-certification group’s 2024 benchmark report.
“This presents a significant opportunity for investment providers who can authentically demonstrate how they’re contributing to positive social and environmental outcomes,” Hegarty said.
Among other results, the survey found 45 per cent of respondents expect ethical investments to outperform over the long-term while almost 80 per cent would allocate to positive impact funds (with 60 per cent willing to do so if returns were comparable with regular products).