The amount invested in ethical investments almost doubled last year to $40 billion. Photo: 123RF
Responsible investing is taking a greater share of the investment market and earning better returns, according to a new report.
The Responsible Investment Association of Australasia's (RIAA) annual benchmark report suggests the tide of change in the sector is gathering pace, with more firms committing to ethical investing.
The association's executive manager of membership and engagement Dean Hegarty said more investment funds were offering more quality products, attaining high returns on their funds.
"It's clear that the trade-off between strong long-term financial returns and investing ethically and responsibly is a myth that is being left in the dust."
The amount invested in ethical investments almost doubled last year to $40 billion, nearly 5 percent of which was sustainably-linked finance.
The survey covered 52 firms either totally based or with substantial investments in New Zealand, 19 of which had leading responsible or ethical investment practices and a further four emerging or close to leading, when measured against RIAA's Responsible Investment Scorecard.
Regulators, lenders, and consumers were pressuring investment funds and they in turn were pressuring companies, Hegarty said.
"The rising tide of codes, standards, and guidance facing investors has lifted all boats."
"For example, negative screening for fossil fuels and weapons increased at the same time the government's requirements for default KiwiSaver providers to exclude such investments came into effect in July 2021."
Investment managers had also improved their backing up of claims around the sustainability of their portfolios, amid growing scrutiny for any instances of greenwashing.
However, New Zealand firms were lagging overseas funds in holding companies to account on environmental and social issues, and needed to move away from a negative and exclusionary approach to responsible investing and take the initiative.
"This finding highlights the strong need for a Stewardship Code for Aotearoa New Zealand, which was released last month, and provides a clear framework for investors to steer the companies they own on critical ESG issues," Hegarty said.