ESG

A significant sum of New Zealand’s capital is now being invested responsibly – totalling $NZ 78.7 billion – with early signs showing consumer demand is increasingly following this rise that has resulted in billions shifting from mainstream to responsible funds. The new report launched today by the Responsible Investment Association Australasia (RIAA), shows this strong up take of responsible investment, from the largest institutions through to boutique funds and KiwiSaver products, is not only benefiting New Zealanders by underpinning strong investment strategies that deliver strong returns, but also contributing to a better environmental and social outlook for New Zealand.

Recently we’ve witnessed that Environmental, Social and Governance (ESG) investments have been growing across asset classes on the basis of stronger beliefs that they are not only ethically proof, but financially pragmatic as well. Yet ESG investments are not immune from macroeconomic trends and financial market shakes, particularly high volatility risk. Among the various themes at play in 2016, we see that climate finance has gained traction. Specifically, understanding the investment and regulatory implications of the COP21 Paris (The 21st Conference of Parties) agreement is paramount to investors globally.

Yesterday’s launch of the responsible investment sector’s annual benchmarking report shows responsible investment has almost doubled in 2 years. The 2016 Responsible Investment Benchmark Report by the Responsible Investment Association of Australia (RIAA) found that core responsible investment has grown by 62% in one year and is now worth $51.5 billion.

Nearly half (47%) of Australia’s investments are now being invested responsibly – totalling $633 billion – with a significant step up in consumer demand cementing this rise that has resulted in billions shifting from mainstream to responsible funds. The new report launched today by the Responsible Investment Association Australasia (RIAA), shows it’s not only consumers who are benefiting, but financial advisers, superannuation funds, fund managers and banks who are leading the way in delivering great products with great returns, whilst creating a better environmental and social outlook for Australia. “In observing the significant and consistent growth in responsible investment we can say without a doubt that this isn’t just a passing trend, but an evolution of the entire sector that is now being driven strongly by consumer demand and engagement with where they invest and bank their life savings,” said Simon O’Connor Chief Executive of RIAA. “Years of demonstrated long-term investment benefits to investors, who consider environmental, social and governance (ESG) factors, have quietly shifted around half of Australia’s investment industry to invest responsibly. Now, it is consumer demand targeted at superannuation funds, banks and financial advisers that is creating unstoppable momentum with implications for all parts of the finance sector,” said O’Connor

Today, 50,000 companies are annually subjected to ESG evaluations by 150 ratings systems on approximately 10,000 metrics according to MIT Sloan Management Review.

The Seventh Annual ESG Research Australia (ESG RA) Awards function was held today in Melbourne. The award winners were: Best ESG Broking Firm: Citi Best piece of new ESG Research by an Individual Analyst or Team: “Risks in Payday Lending andGoods Rental” by Sandra McCullagh and Chris Parks of Credit Suisse Best Piece of Ongoing ESG Research by an Individual Analyst or Team: “Australian ESG/SRI AGM Series” by Sandra McCullagh and Chris Parks of Credit Suisse At a luncheon function today in Melbourne attended by some of Australia’s leading superannuation funds, fund managers and broking firms, the coveted annual ESG Research Australia (ESG RA) Awards were announced. ESG RA is an association of Australian superannuation funds, fund managers and asset consultants which has the single objective of increasing the quantity and quality of broker research in Australia that includes consideration of ESG issues (Environmental, social & governance issues). Membership currently represents over 50 institutions managing over $100 billion in Australian equities, and includes some of Australia’s largest superannuation funds, fund managers and asset consultants. The awards ceremony also included an experienced panel showcasing and debating many of the very relevant issues raised by this broad array of research reports produced in 2015. The panel was expertly moderated by the Responsible Investment Association Australasia’s CEO Simon O’Connor. Twenty-two pieces of research conducted during 2015 were nominated by members for consideration. Environmental and social research pieces dominated the nominated topics for this year’s awards with six nominations each. Social issues included cyber security, employee safety, and payday lending, whilst climate change issues dominated the environmental nominations. Governance issues were also well represented with executive remuneration the dominant area of interest.

In September 2015, RIAA launched our new 3-Year Strategy (see here) that contained one big audacious goal – to grow funds flowing into core responsible investment products from 2.5% of the market to 10% of the market in 3 years.

The GSIA is a coalition of membership based sustainable investment organisations (“SIF’s”) , currently including the USSIF, UKSIF, Eurosif and the VBDO (Dutch SIF) with further links to the SIF network across the world. Our work as a coalition has included the leading global research on the size and growth of the responsible investment industry, the Global Sustainable Investment Review. This biennial report is the best source of information on the global market dynamics in responsible investment, which measured the industry at $US 21.4 trillion in AUM in 2014. This year’s summit was hosted by the UKSIF in London, and included an enjoyable event with UKSIF members that allowed us to discuss the market dynamics and key trends across each of our markets. It was great to be able to reach out and meet a solid cross section of UK responsible investment organisations at that event.

During our recent member-only webinar, speakers from CAER, MSCI ESG Research and Sustainalytics provided no fewer than 15 ESG trends expected on the radar in 2016. What came through strongly was that ESG issues are ever increasingly dynamic and that to stay abreast of shifting trends requires ever better data.

We spent a big chunk of last year spring cleaning our 10-year-old Responsible Investment Certification Program – the program designed to verify and maintain the quality of responsible and ethical investing products and to make it easier for consumers to navigate towards the growing range of responsible investment products and suitably experienced financial advisers.