Investing responsibly: the basics

24 February 2015

Following on from our article last week about why to divest from fossil fuels, we share some tips from SBN members Jonathan Neal of Rise Financial and Rodger Spiller of Money Matters to help ensure you are investing responsibly.

What is responsible investment?
Responsible investing means asking, or finding out, whether your investments take environmental, social, governance and ethical factors into account, rather than being channelled into industries that might go against your own morals.

Depending on the nature of the investment (whether it is a direct investment such as a share in a company or a managed fund where your money is pooled with other investors and invested in a particular fund such as KiwiSaver) it may be difficult to know, at least initially, if your money is being invested in fossil fuels. 

Here are some tips to ensure you are investing responsibly.

Think about it
A good way to start is to think about what industries you would like to be actively supporting and/or avoiding through your investments.  

Do your research
Find out what the fund invests in. There are lots of companies that are operating to create a sustainable future that you can think about investing in.  See our previous article for some ideas of who to consider.

For direct investments, such as shares in a company, take a look at the company’s financial statements to see what the company’s activities are. If it’s a listed company you can find it on their website – if not, call them and ask to see it.

For managed funds, like KiwiSaver, read the investment statement, fund fact sheets and the prospectus for your particular KiwiSaver provider (if you can’t remember your KiwiSaver provider, or want to change it, you can contact 0800 KIWISAVER). These will be available on the KiwiSaver website.

If you need help, you can always ask a financial advisor specialising in responsible investments.

Read the fine print
For example –
Fund A may claim to be fossil-fuel free and yet may invest in resource mining or fossil-fuel intensive industries.

Fund B might fund existing gas infrastructure and turn away from coal seam gas product, extraction or generation.

Fund C may exclude any company with more than a certain percentage exposure to fossil fuel.

Ask questions

Direct investments
If you can’t decipher the information, contact the company for information or ask your share broker.

Managed funds
If it’s not clear or transparent, contact your KiwiSaver scheme provider or fund manager if you have one.  Their customer service department will be able to help you.
If you have a financial advisor, ask them to make enquiries on your behalf

Choose responsible managed funds*
Choose a fund manager with responsible investment options.

Select a responsible non-KiwiSaver fund such as the AMP Responsible Leaders, Australian Ethical and Hunter Hall funds.

Opt for a responsible KiwiSaver scheme, for example Grosvenor KiwiSaver Scheme has two socially responsible investment funds (Grosvenor recently announced it has removed all directly-held fossil fuel-related companies from its investment portfolios (it restricts companies which earn more than 5% from fossil fuels)). Other KiwiSaver options include:

  • OneAnswer KiwiSaver – Sustainable Growth Fund
  • Super Life KiwiSaver – Ethical Fund
  • Koinonia KiwiSaver Scheme (a Restricted Scheme for people involved in the Christian church)– it has an Ethical Investment Policy which reflects Christian values
  • Craig Investment Partners – kiwiSTART Defined Balanced SRI Fund.

Ask questions
Always ask for clarification before you decide whether or not to invest.
Demand transparency.

Drive demand and affect change!
The more people asking questions and demanding responsible investment options, the faster the market will respond.

* Contact a financial adviser to see if these funds are appropriate for your risk profile and wider investment needs

For more information about responsible investment look at the following websites: http://www.responsibleinvestment.co.nz/

http://moneymatters.co.nz/

http://responsibleinvestment.org/

https://www.sorted.org.nz/a-z-guides/kiwisaver-schemes-and-funds

Thank you to Jonathan Neal of Rise Financial, and Dr Rodger Spiller of Money Matters, financial firms specialising in responsible investments, in helping compile this guide.

Want to find out more? Read Support smart energy solutions and divest from fossil fuels and find out about SBN’s project on sustainable investment.

Jonathan Neal and Rodger Spiller are authorised financial advisers and disclosure statements are available on request and free of charge from them. Comments sourced from Jonathan and Rodger in this article are of a general nature and are not personalised financial advice. The content of this article is intended for information only and is not a securities recommendation and it does not contain advice. This article does not take any individual investor’s personal circumstances into account. Rise Financial, Money Matters (NZ) Ltd and related parties disclaim any liability arising from reliance upon any matter contained in this profile except for statutory liability which cannot be excluded.