Responsible investment grows to $42.7b

KiwiSaver funds which pulled out of tobacco investments has boosted the amount of money considered to be invested responsibly in New Zealand. Photo/Lynda Feringa.

The move by KiwiSaver funds to exit investments in tobacco and controversial weapons has seen a massive spike in the amount of money invested responsibly in New Zealand.

Investment by funds which screen out the nasties has grown from $1.6 billion to $42.7 billion in the last year, according to the latest Responsible Investment Benchmark report.

Simon O'Connor, chief executive of the Responsible Investment Association Australasia, said the jump was primarily due to the negative screening of multiple issues by the majority of New Zealand's KiwiSaver providers.

"This is a staggering increase and is a monumental development for New Zealand's financial markets."

"We have never seen a market switch so rapidly to responsible investment. It's one of the most significant global changes to happen to the sector in 2016 and highlights that New Zealanders are not prepared to build their retirement savings at any cost," O'Connor said.

KiwiSaver providers made the change after a public outcry following reports by the New Zealand Herald and Radio New Zealand highlighting the level of investment in tobacco, cluster bombs and landmines.

O'Connor said Kiwis had communicated clearly that they were not willing to make money at the expense of the planet or its people.

"Consumers and investors alike are taking a stance and aligning their investments to their values."

But O'Connor said investment managers could be doing more when it comes to positively choosing where to invest money rather than just taking an exclusion approach.

"For us it is not just about getting more and more fund managers to do negative screening.

"Where we are moving globally is where people choose to invest is even more important."

O'Connor said it was starting to see more investment be done through taking a environmental, social and governance approach.

"We are starting to see capital move towards more sustainable investment."

In New Zealand the New Zealand Superannuation Fund used this approach as well as some investment managers like AMP.

But more could be done.

O'Connor believed there was a great opportunity for KiwiSaver providers to engage with their members on what they wanted.

"I think consumers get excited by the positive impact their investment can have. The connection through a responsible investment approach is a great way to get deeper engagement."

O'Connor said a big driver of the growth was consumer demand and interest but there remained some deep-set beliefs that using that kind of investment approach would have a detrimental impact on returns.

But he said research from itself and Harvard had proved that was not the case.