Ethical or socially responsible investing (SRI) continues to gather attention both internationally and in our corner of the world. However, as QuayStreet Asset Management Portfolio Manager Stefan Stevanovic explains “despite the topic of socially responsible investing often resurfacing and attracting attention, the actual amount of money allocated to socially responsible investment funds still remains very low.”
“For New Zealand, a country that has a long track record of implementing progressive social policies and a strong drive for sustainability, it is surprising that approximately 0.3% of all KiwiSaver savings are invested in socially responsible funds*. However, this is gaining momentum with growing demand and uptake from a variety of investors.”
The challenge investors face today is deciphering which fund in New Zealand is truly socially responsible.
There is a broad range of investment funds or strategies labelled as green, ethical, socially responsible or sustainable with varying levels of screens and processes in place.
In 2016, many KiwiSaver funds amended their investment policies to exclude tobacco and controversial weapons manufacturers, similar to the New Zealand Super Fund’s exclusion list. This list is primarily comprised of companies that many would classify as the worst of the worst, but it still does not capture other ethical “serial offenders”.
Since this industry-wide shift, some generic funds have started actively promoting themselves as “responsible” but that does not mean they necessarily exclude all investments in companies known for polluting, gambling or manufacturing weapons. That might be acceptable for some investors, but many others who are concerned about climate change and social wellbeing, would expect these types of companies to be excluded from their investment portfolios.
QuayStreet Asset Management screens for “good” and “bad”.
As Stefan explains “our Socially Responsible Investment Fund has a stringent investment process, which is designed to appeal to a wide group of investors without compromising investment returns”.
QuayStreet applies a two-stage screening process by first filtering out those companies that operate in unethical industries or have negative environmental or social effects; for example industries such as tobacco, weapons manufacturing and nuclear.
They then assess each company’s performance across environmental, social and governance (ESG) factors.
“This is where we take a deeper dive into how the business operates, how it impacts the environment and society and decide if it meets our criteria. The basic idea is that a company that has a strong ESG profile is one that is focused on sustainability and therefore is more likely to achieve greater long-term returns.”
QuayStreet’s KiwiSaver Scheme was one of the first KiwiSaver schemes to make a socially responsible fund available to the public. “The Fund is now over 10 years old. Over the past decade we have fine-tuned our qualitative-based research and the Fund remains true to its name.”
QuayStreet SRI Screening Process
Assessment of available investment options:
Shares, bonds, property, investment funds, exchange traded funds
Negative screening - exclusions of:
Weapons and armaments, fossil fuels, nuclear power, tobacco and alcohol, gambling, adult entertainment
Valuation, business model, product / service, industry positioning, management and governance
Positive screening - assessment of:
Environmental, Social & Governance (ESG) factors; identify controversies; compare, quantify and record
Monitoring & Implementation:
Frequent review of positions, monitor market updates, third party research, company engagement
All you need to know about QuayStreet
QuayStreet Asset Management is a specialist funds management firm awarded Boutique Manager of the Year 2018 by FundSource.
10 Actively Managed Funds
- 3 Diversified Funds to meet various investor risk profiles: Conservative, Balanced or Growth.
- 4 Sector Funds for those seeking exposure to certain asset classes or geography: NZ Equities, Australian Equities, International Equities and Fixed Interest.
- 3 Speciality Funds: Socially Responsible Investment Fund, Income Fund (those seeking regular income payments), Altum Fund (those seeking a potentially higher growth/higher risk investment).
- The Funds can be used as a standalone investment or in combination with other investments. Investing in the Funds is easy. You can invest as little as $100 per month or $1,000 as a lump sum.
Find out more:
- 0800 782 900
- [email protected]
*QuayStreet market analysis based on data as at 31 December 2017. Based on KiwiSaver funds that have explicit socially responsible investment objectives and process. QuayStreet Asset Management Limited (QSAM) is the manager and issuer of the QuayStreet Funds and QuayStreet KiwiSaver Scheme. The QuayStreet Funds Product Disclosure Statement and the QuayStreet KiwiSaver Product Disclosure Statements are available at quaystreet.com. Investments are subject to risk and are not guaranteed. Past returns are no guarantee of future performance and returns can go down as well as up. For more information around the SRI screening process visit quaystreet.com. This information is not financial advice and does not take into account the investment objectives, financial situation or particular needs of any particular person. Accordingly, before making any investment decision we recommend that you read the Product Disclosure Statement at quaystreet.com and seek professional assistance from an Authorised Financial Adviser. The QuayStreet Client Services Team’s Craigs Investment Partners Adviser Disclosure Statements are available on request and free of charge.