When it comes to investing your KiwiSaver or other investments, there are so many fund options out there. The first aspect you look at is the time-frame you want to invest, but you also must consider if what you are investing in aligns with your values.
First of all, what is a Responsible Investment (RI) policy?
Most funds in KiwiSaver have a Responsible Investment (RI) policy, this may exclude things like controversial weapons and tobacco.
Responsible Investment also considers the environmental, social and governance (ESG) factors of each company or asset before investing your money. These factors cover the way a company operates, treats its employees and its impact on society and the environment.
Then, what is a Socially Responsible Investment (SRI)?
Socially Responsible Investment is when fund managers take a step further and proactively exclude assets considered to have a negative social impact. This means they will not invest in certain controversial sectors, such as:
- alcohol,
- gambling,
- military weapons,
- animal rights,
- fossil fuels, and many more.
The SRI funds will aim to exclude any company that makes more than a small proportion of their revenue from one of these sectors.
How do we know these investments are socially responsible?
To ensure the providers are meeting this objective, a handful of managers have funds certified by the Responsible Investment Association Australasia (RIAA). This means the funds are monitored and continuously certified by the RIAA.
Does it affect returns?
Sustainable investors work to achieve strong financial performance, but with the firm idea that these investments should be used to contribute to the ongoing development in social, environmental and governance practices. As with any investment there is market fluctuation, but we would usually expect to see a return of similar results to its standard counterpart. As these funds are relatively new there may not be any 5 year return data yet – either way always talk to your adviser for advice. And of course, with any investment it’s important not to base decisions on past returns, but rather future potential.
The future of socially responsible investing
As more investors demand ethical investment options, we’re seeing exciting developments in this space. Fund managers are creating more specialised options, such as environmentally focused funds, and deepening what qualifies as “socially responsible.”
This trend means you have increasing power as an investor to positively influence how companies operate globally. Your KiwiSaver choices can drive real change while still working towards your retirement goals.
Should I be in a Socially Responsible Investment Fund?
Socially Responsible Investment isn’t for everyone. If it is something that you want to know more about, our Wealth Advisers at Cole Murray know all the ins and outs.
We think it’s important you have the choice on how you invest your money. For many, that will mean taking a more ethical stance. So give us a call to learn more.
