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World Investor Week is a global campaign to raise awareness of investor education and protection, promoted by the International Organisation of Securities Commissions (IOSCO) and hosted in New Zealand by the Financial Markets Authority (FMA).
The New Zealand theme for World Investor Week 2023 is ethical investing, aiming to empower investors to confidently make investing decisions that are aligned with their values.
Your Values
A good place to start with ethical investing is being clear how you want to reflect your values in your investments. What do you want to support? What would make you feel uncomfortable or compromised to profit from? What are your non-negotiables? Values are personal. What is important to you may be different to someone else.
Tobacco, alcohol, animal testing and weapons are just a few things that can polarise opinion and be perfectly acceptable to one person while unacceptable to someone else. Conversations with friends and family can be a good starting point to understand what is important enough to you to shape how and where you invest your money.
World Investor Week is a global campaign to raise awareness of investor education and protection, promoted by the International Organisation of Securities Commissions (IOSCO) and hosted in New Zealand by the Financial Markets Authority (FMA).
The New Zealand theme for World Investor Week 2023 is ethical investing, aiming to empower investors to confidently make investing decisions that are aligned with their values.
Not all ethical investing options are the same. At one end of the scale, they exclude investments in certain industries (like weapons, coal or tobacco), and at the other, they invest in activities that are as much about tangible social or environmental results as they are financial (like sustainable housing or new clean energy generation).
One example of exclusions are the six KiwiSaver default schemes which are required to exclude investments in some weapons and investments that are materially involved in the business of fossil fuels.
Another approach is where providers continue to invest in companies where environmental, social or governance (ESG) concerns exist, and claim to use the influence which comes from being an investor in those companies, to improve their business practices (for example by using voting rights). Whether this approach is successful, particularly where the investor seeking the influence has only a modest investment in the company, is a matter for debate.
Ethical investing
'Ethical investing', 'responsible investing', 'green finance', 'sustainable investing', 'social investing', 'ESG'. Whatever you call it, many of us are keen to align our investment choices to our values. But before you jump in because an investment claims to be 'ethical', take a deeper look at what you’re investing in and other factors you may need to consider.
Broadly speaking, ethical investing is when you choose investments based on your personal values on the expectation that your money will help causes you care about and not harm people, animals or the planet.
Ethical investing might not always be straightforward. For example:
companies which develop drugs to help cure or manage serious illnesses can use animal testing as part of the discovery process
if you exclude all companies having any involvement with gambling, you won’t invest in a large number of internet companies, including Google
you do not want to invest in weapons, but you support countries defending themselves against foreign aggressors
you do not want to invest in any companies involved in nuclear weapons, so you can’t invest in a broad range of manufacturers who supply components, or vehicles which can carry nuclear weapons, including aircraft manufacturers
If you do not want to invest in companies with anything to do with alcohol, you can’t invest in many types of retail, commercial property, airlines or hotels
Consider your values and what is important to you. Your provider should be able to explain how it deals with different scenarios.
Look beyond the label. Just because a fund, company or bond calls itself ‘green’ ‘positive’ ‘sustainable’ or ‘ethical’, doesn’t necessarily mean that it will meet your definition or expectations.
It pays to dig a little deeper. For example, if investing in a managed fund or KiwiSaver, check if your fund's investments line up with what you think you're investing in. You can download a full list of assets from Sorted’s Smart Investor tool, which will also link you to key documents for the fund, such as the Statement of Investment Policy and Objectives (SIPO). If this all feels like too much work, call your provider and ask them to explain it to you. If your provider doesn't want to answer those questions, or finds it hard, or they are hard to get in touch with, consider another provider.
Read the fine print. For example, some fund managers have exclusions that apply to their own fund, but not if they invest indirectly through another fund. Or, the exclusions apply to shares but not to other asset classes like bonds.
Some independent certifications such as RIAA (Responsible Investment Association of Australasia) or UNPRI (United Nations Principles for Responsible Investment) can be helpful when researching ethical investments, but research them to ensure you understand what they mean for the investment you are considering.
*This list is published twice a year, at the end of March and September, so will be for a point in time. Some investment managers do this monthly. Another reason it pays to check.
If a financial provider is claiming something, but not living it up to it, they could be greenwashing. Get in contact with the financial provider for an explanation and details of their complaints process. If you’re concerned, let the FMA know.
Your provider should clearly explain their approach
You can ask a provider specific questions to clarify what they mean if they use any of the following terms: green, ethical, sustainable or social.
Providers offering ethical investment options must clearly explain their ethical investing policy or framework. For example, how they decide what they will and won’t invest in, and when they will divest.
They should also explain any exceptions to their exclusion criteria. For example, they may state that it is still acceptable to invest in a company that earns revenue from fossil fuel production, provided that is less than 15% of their total revenue.
If a provider claims to have a proactive approach that aims to generate a positive impact, they should explain how it works, how it will be measured and provide a timeframe.
Get involved
Want to support World Investor Week 2023? You can get involved by sharing the FMA’s content or creating your own during the week of 2 – 8 October. Let us know what you’re planning by emailing us at [email protected]
Use our hashtags:#WorldInvestorWeek #WorldInvestorWeek2023 #WIW2023
