Voices Of Aotearoa: Demand For Ethical Investment In New Zealand 2023

Investors want to do well and do good

In the face of financial market turbulence, consumer demand for ethical investing not only remains resilient but continues to gain momentum. Consumers not only want to avoid investing in companies that cause harm, they are increasingly also looking to invest in KiwiSaver and investment funds that do good.

Barry Coates, CEO of Mindful Money explained: “The major change that has happened over the past year is the significant rise in New Zealanders who want their KiwiSaver or investment funds to invest in companies that make a difference. They still want to avoid harmful companies, but they also want at least part of their hard-earned savings to address real world challenges, such as climate change, health care, social housing and clean rivers.”

Dean Hegarty, NZ based Executive Manager of the Responsible Investment Association of Australasia (RIAA) commented: “It is encouraging to see Kiwi’s are now looking beyond just what they want to avoid, and starting to hone in on how their investments can be allocated to drive positive change in the world. We’re seeing leading New Zealand fund managers rapidly improving their engagement practices and increasing allocations to positive impact within their mainstream funds. These findings demonstrate how important it will be for them to clearly articulate this work to customers, because the category of investing for positive impact is set for rapid growth.”

This is the fifth annual survey of the New Zealand public undertaken by Mindful Money and the Responsible Investment Association of Australasia (RIAA). The survey, conducted by market researcher, Dynata, provides valuable research, trends and insights for the finance sector and public audiences.

The key findings of the survey are:

1. Three quarters of New Zealanders want their KiwiSaver and other investment funds to be managed ethically

Despite high levels of financial uncertainty and volatility, consumer demand for ethical investment remains strong. Almost three quarters of New Zealanders (74%) expect their investments to be managed ethically and responsibly. The number of people willing to move their funds if the investments do not align with their values has increased to 59% (+ 4%).

Support for ethical and impact investing is higher with certain groups in New Zealand, including with women, younger generations and those with higher educational levels.

Barry Coates commented: “A large majority of consumers have expectations that their KiwiSaver or retail investment provider will invest ethically, even during the current financial turmoil.”

“An increasing number of consumers are finding out which companies are in their KiwiSaver of investment fund, and they are saying they will shift their investments if investment choices do not reflect their values. “

“It is striking that half of the population are considering switching to invest in ethical/responsible funds in the next five years.”

2. The public are concerned about greenwashing

Around half of the population have concerns over greenwashing. Consumers want to know what types of companies are in their portfolios, and they are more likely to choose ethical and responsible funds that have independent certification.

Dean Hegarty, Executive Manager at RIAA said: “It should be a wake up call to fund providers that half of the public are concerned over misleading claims that investment funds are ethical, sustainable or green.”

“Fund managers need to provide evidence to back up any claims they make, including communicating the ways that they are engaging with companies to improve their performance on a range of social and environmental issues.”

“There are a growing number of consumers who look to independent certification as a key part of that evidence – 59% say they would be more willing to invest ethically and responsibly if financial products were certified or labelled as responsible or ethical by an independent third party.”

3. There is growing interest in investing for positive impact

One of the most significant findings from this survey is the increase in consumer interest in investing for positive impact, both as dedicated funds and within mainstream ethical and responsible funds. A growing number of New Zealanders understand that investment has real world impacts, including on issues such as climate change, and they are interested in funds that can demonstrate positive impacts.

The proportion of New Zealanders who would be prepared to invest in a fund dedicated to investing in companies creating a positive impact has risen significantly over the past year to 80% (up by 11% from 2022).

Barry Coates, CEO of Mindful Money commented: “Most investors have strongly held views on avoiding investment in companies that don’t align with their values. This survey shows there is also a growing demand for investing to create positive outcomes. Investors want to be able to have their funds invested in companies that deliver real world solutions.“

“Positive outcomes are a motivator. Over half of those surveyed indicated they would save more if they knew their investments were creating positive impact.”

4. There are rising expectations that Financial Advisers will be knowledgeable about ethical/responsible investment

There are rising expectations that financial advisers will consider their clients’ values when providing financial advice and be knowledgeable about ethical and responsible investment options.

Dean Hegarty observed: “While maximising financial returns is still the most important expectation of financial advisers, the reality is their customers also expect them to be knowledgeable about responsible investment options, to ask about their values and to be knowledgeable about independently certified products.”

“This survey shows the huge opportunities for those advisers that are knowledgeable and skilled in responding to their client’s values and sustainability preferences.”

The survey also shows that consumers don’t believe the old myths of a trade-off between ethical investing and earning good returns. 45% expect ethical and responsible investments to perform better in the long term (up by 5% from 2022) while 45% see the relationship as neutral. This is consistent with a large and growing evidence base, including for Australian and New Zealand investment funds, using comparative returns between ethical/responsible funds and traditional funds.

Barry Coates commented on the findings: "The survey results signalling a deepening of the public’s appetite for investing in accordance with their values. They are using the Mindful Money website to look at the companies that are in the portfolios of their favourite funds and seeing if those companies align with their values. And increasingly they are seeking investment providers that not only avoid harm, but also invest at least part of their portfolio in climate solutions and positive outcomes.”

Dean Hegarty concluded: “RIAA's Certification Program has been running for over 15 years, and we are witnessing rapid growth in demand from investment providers seeking verification. Much of that growth is being driven and shaped by the demand from consumers we’re seeing in this survey. Investors should prioritise funds that clearly articulate their sustainability objectives. A RIAA certified fund gives confidence to investors that it is true to label and meets the Responsible Investment Standard.”

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