By Amanda Morrall
Yesterday I attended a responsible investment briefing in Auckland. Laugh if you will. My colleagues did.
Given changes wrought by global warming, fall-out from the global financial crisis and also challenges faced by an ageing population, ethical investing or socially responsible investing (SRI) is growing in leaps and bounds. Attendance at these briefings used to be quite small but the packed out conference room where the event was held was a reflection of that.
Did you know, for example, that as of May 2012, more than 1,000 investment houses world-wide had signed onto the United Nations Principles for Responsible Investment (PRI) initiative. The PRI is an internationally-accepted benchmark for how institutional investors should manage environmental, social and governance issues. As of May signatories to the PRI had more than US$30 trillion in assets under management.
Today's Take Five is thematically geared to that.
1) Risk and return in ethical funds
Michael Walsh is risk manager for Australian ethical fund manager Hunter Hall Ltd. In my interview with Walsh below we discuss the variable ways of defining ethical investments, the scale of them, their performance and some of the challenges that lie ahead.
2) New Zealand Superannuation
In my interview with Super fund CEO Adrian Orr earlier last month, Orr talked about the fund's stock selection process and internal policy on socially responsible investing, which is closely aligned with the U.N.'s PRI. Its mandate requires them to:
- monitor its portfolio for breaches of its responsible investment requirements;
- engage with companies its has concerns about; and
- work closely with its investment managers to ensure the votes they make on behalf the the Super fund are appropriate.
Those interested to learn more about the Super fund's work in this area are encouraged to visit their website.
3) KiwiSaver
In the KiwiSaver space only 2% of members are invested in funds of a socially responsible bent. To see which KiwiSaver providers have funds of a socially responsible nature click here.
See also my piece here on "How to be good" in KiwiSaver and our KiwiSaver Q&A on that subject here.
4) Debunking myths
Another keynote speaker at the aforementioned conference was Paul Smith, general manager of strategy and communication for Australian Ethical, another investment firm from across the Tasman specialising in socially responsible funds. Paul paid us a visit at interest.co.nz to debunk some common myths around ethical investing and to discuss whom these funds appeal to and why SRI funds are compatible with long-range investment outlooks that take into account things like global climate change and our ageing population. Here's my interview below.
5) Leadership
Another speaker who really impressed me was Sovereign's CEO Charles Anderson who talked at length about what steps Sovereign has taken to improve its own record on the environment, its relations with the community and its employees, adjustment to its investment practices. Anderson says much of the work in this area has been driven from his own personal ambition to walk the walk and not just talk it. Part of that internal reformation includes hiring internal auditors to measure the company's ecological footprint and then lighten it with new waste management processes and carbon offset, the institution of volunteer days for its employees, and the support of local charities. The health and life insurer eventually plans to introduce a website where policy holders can see exactly what their premiums are invested in and the impacts of those companies.
Kudos to you Mr. Anderson for showing leadership in this area.
Long-term New Zealand SRI champion Roger Spiller will be holding a short course at the Auckland University School of Business next week on how to transform your business and life for sustainable success. For more, see Rodger's website here.
To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall
7 Comments
Paul Smith interview was surprising so thanks for that. It's interesting how many misconceptions and funny ideas you have before you hear more of the story.
I did wonder when he was talking about returns from ethical investing whether because they are very careful with their choices if that helped by avoiding the downisde of the more bubbly type high risk investments that go pear shaped and also whether that level of care meant the fees were higher.
To date my attittude has been to chase lower fees on the assumption the average returns before fees are so close as to be the same over the long haul.
But what he is suggesting is there are a group who achieving higher returns through careful management and making ethical choices along the way.
I wonder if it's enough to move my Aussie super?
you have to be very, very careful when appraising 'ethical investment'.
Regardless of what you are investing in, the mere fact that you expect to profit (and presumably exchange that profit for goods/services) is a guarantee that you are gonna exascerbate climate change, resource depletion, add to pollution.
The best environmental investment is not to. The rest, seriously, is self-delusion-by-willing-participant.
Why, oh why, do folk not see the correlation between 'making money', and 'stuffing the planet'? Sure, some things - and some companies - are better than the alternatives, but all omelettes equire eggs to be broke, and the only valid ecological aim is to break less eggs.
Saddly the ecological movement was hijacked by unscrupulous people for profit. It started with carbon emmisions and proceeded all the way to rubbish collection.
For example, when I bought the house I now live in, my yearly bill for rubbish collection was $30 for one bag per week and we paid this money to the council.They would not accept two bags full stop, so everybody had a compost pit and threw out only inorganic rubbish. Then recycling came happily along under the guise of environmentalism, and we could now put out a bag per week, plus recyclables, for the same price per year. Of course, at this time going to the rubbish tip to dump excess was for free, as many will remember, and still is in some parts of New Zealand, but not for long mind you!
Then the rubbish tip changed hands and became privatized. Soon enough the structure of the service became a business, a profit seeking venture just like the petrol station, the butcher, or your favorite medical practitioner.
We could now tip as much rubbish as we wanted, and they would collected, but we had to wash all recyclables before tipping them or they would not collect them. Fair enough we all said, and carried on. It was great not to be restricted to one bag per week, and people went overboard with it, as we normally do! Then, the changes started accelerating...
We could no longer put recyclables out in bags or boxes that were to be dispossed off, we had to buy a plastic container, from them for $50, or they would no longer pick up the recyclable items. We could no longer put the rubbish out in cheap rubbish bags, we now had to buy their rubbish bags for a dollar to throw the rubbish away. Today we pay nearly $3 for each bag, mind you we can put out as many as we want. The more, the merrier... in their view. Not very ecological, but very profitable. Their profitability rose parabolically, as it should with low costs and revenues doubling often, and the business sold again, and again. All for profit in the name of the ecology. Of course, the $30 dollars we used to pay to council before the privitazation doubled, and it's stiil going up.
To add insult to injury, this brand new "eco-friendly" recycling center stoped receiving "green-waste" for free, and started charging $10 for the back of the ute filled with leaves and branches, to then turned it into compost and sell it for $24 per meter cube at first. Today, the price is $45 per cube. Very profitable indeed!
In summary, where we used to put out a bag per week per household plus recyclables, we put at least two bags per week per household, because nobody composts any more, plus recyclables. What cost us $30 per year, today costs us $300, and will go up again soon! Mind you, we still pay the council for rubbish collection because they subsidize the "Recycling Center" in the name of environmentalism. Got to admire their ingenuity, eh?
In all fairness I must say they have done some good, for we no longer fill the land locally, but we haul the rubbish to the nearest city for "processing." Very eco-friendly!
HGW
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