Talk Money with Tony Field – August 14, 2015

It is important to remember that funds involved in responsible investing do take different approaches (file)
It is important to remember that funds involved in responsible investing do take different approaches (file)

Responsible investing is on the rise in New Zealand.

Total assets grew 10 percent last year to $63.5 billion. The money is being invested globally by superannuation funds, fund managers, advisers and KiwiSaver funds.

The two biggest investors are the NZ Super Fund and the Accident Compensation Corporation. They account for 86 percent of the funds under management.

But a report from the Responsible Investment Association Australasia (RIAA) says investing by the wider public is on the rise too.

This sector grew by 19 percent last year to $3.2 billion. It includes church groups, community trusts, Kiwisaver accounts and retail ethical funds.

A big question mark over the sector has been whether investing ethically is harmful to returns.

But the RIAA says that is not the case.

It points to research from Australia that found that responsible Australian Equities Funds and the Responsible Balanced Funds both outperformed their relevant benchmarks over one, three, five and 10 years.

RIAA chief executive Simon O'Connor says: "These performance assessments find, once again, that the myth that responsible investment underperforms is baseless. The Australian performance figures are relevant for all markets in this region, and add evidence to a mounting global consensus.

"Those who believe investing with your values means lower returns have their heads in the sand."

There is a healthy debate online between the advocates for ethical stocks and those who say there is a place for 'sin stocks'. The latter argue that investing in stocks like tobacco companies can produce outsize returns, partly because they are shunned by some investors and therefore are underpriced in comparison to the dividends they return.

But what seems clear is that if you do want to invest in a responsible way you do not have to miss out on good returns.

It is important to remember that funds involved in responsible investing do take different approaches. Some exclude stocks or sectors they think are harmful. While other funds actively seek out companies that they believe are doing good.

Here is my chat with Paul Henry about responsible investing.

The New Zealand Super Fund has invested US$75 million (NZ$114 million) in high tech company View.

The US-based company makes dynamic-tinting glass, which helps building occupants control light and glare. The company says the glass also preserves views because there is no need for blinds OR shades. It is installed in more than 120 buildings across the United States.

Matt Whineray, NZ Super Fund chief investment officer, says: "View's growth potential in a large market, and the exposure it provided to the energy efficiency sector, made it an attractive addition to the Fund's portfolio."

The Fund invests around the world and allocates a small amount (1.5 percent) to early stage companies that have strong growth potential.

Its other investments in this area include the fuel cell manufacturer Bloom Energy, wind turbine developer Ogin Inc and carbon recycling company LanzaTech.

Fonterra has announced plans to cut the amount of product it will put up for sale at its Global Dairy Trade auctions for the next 12 months.

That was revealed on the same day that the cooperative was put on a negative credit watch by rating agency Standard & Poor's.

S&P has changed Fonterra's credit rating from A/stable to A/watch negative.

That prompted Fonterra to issue a statement: "While current global prices are unsustainably low, we take a longer term view of the cyclical nature of the international dairy market and have confidence in the fundamentals for dairy."

Volume will be cut by an additional 7 percent, meaning in total the volumes for the season will be 33 percent lower than last year.

Fonterra hopes that by reducing the amount of product for sale at the auction it can put a floor under the prices, which have fallen back to 2009 levels.

The next auction occurs on Wednesday morning New Zealand time.

The New Zealand dollar has weakened.

It is trading at 65.78 US cents and 89.28 Australian cents.

It is also down against the British pound, at 42.14, and is trading at 81.81 yen and 58.96 euro cents.

3 News