A decade ago if you wanted investments that were sustainable or green, you were often seen as fringe or even an oddball. Back then it was widely believed that you couldn’t invest in line with your values and at the same time make money, these were polar opposites.
You had to choose between returns and ethics. This of course meant that ten years ago ethical investors weren’t really seen as serious investors. But how the world has since been turned on its head.
Preferring an ethical investment approach, for example with your KiwiSaver, is no longer something from the fringe. According to the Responsible Investment Association of Australasia and MindfulMoney, the number of Kiwis wanting ethical investments is growing at a staggering rate, in fact twice as fast as the wider investment market.
Now the majority of investors want their KiwiSaver to be invested in line with their values.
There has also been a huge shift in the thinking around whether investing ethically will cost you in terms of financial returns.
Four in five people now believe that over the long-term investing with values will outperform funds that include “sin stocks”.
Possibly even more surprising is recent research by US-based ThoughtLab covering 500 wealth management businesses and nearly 2,500 investors across 15 countries. Their results show that there are other long-held ethical investing stereotypes that need to be discarded.
Ethical investing used to be regarded as mostly the territory of idealistic millennials, who probably had no money to invest anyway. But according to ThoughtLab it’s not just the young who care.
A higher proportion of ‘boomers’ (now aged about 58 to 75 years old) are expecting to invest with an environmental, social and governance focus than the younger ‘millennials’ (who are now roughly 18 to 40 years old). That’s the opposite of what many people would expect.
It may also be eye-opening to find how seriously the ultra-rich now take investing with an environmental and social focus. This shift isn’t confined to those with small or average investment amounts, it’s also the world’s billionaires who are looking for impact with how they choose to invest.
As a sign of how far mindsets have changed, investors are now thinking beyond just the ethics of their investment product choices. ThoughtLab’s work also uncovered a widely-held expectation that money management firms need to follow ethical practices.
In fact close to a third of investors go as far as considering the social purpose of whoever they appoint to manage their money.
Investors need to know that they are no longer alone if they care about the ethics of their investing, and they no longer need to expect that their returns will be lower.
Nor do they need to be young, broke or hard-core tree-huggers. Throw those ideas out the window - ethical investing has indeed gone from the financial fringe to the monetary main stage.
This commentary is general information only, it is always a good idea to seek professional financial advice for your personal circumstances.
-John Berry is co-founder and CEO of ethical fund manager and KiwiSaver provider Pathfinder Asset Management.
Originally published in Stuff 27/1/2022
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