Socially Responsible Investing
Introduction
Socially Responsible Investing (SRI) is the focus of this month's newsletter. We'll be addressing what it is, why it may be of interest to you, key considerations for SRI funds, and provide real examples of SRI fund options accessible to you (assuming you're based in New Zealand).
As a side note, with the '20/21 financial year coming to an end, you may be curious about accessing your Consilium/Synergy consolidated tax report - please see the bottom of this email for further information on this, as well as information about upcoming changes to both the RWT Rate and the Consilium SRI fund.
Why SRI
SRI funds provide an ideal opportunity for mutual benefit - the ability to grow your personal wealth through investments whilst also benefiting wider communities by placing greater emphasis and value on the greater good. By extension, this is also an opportunity to align your investments with your personal values and principles - if you don't like the idea of investing in nuclear warheads, GMO's, alcohol, or tobacco, you can choose not to.
Historically SRI funds have been somewhat dismissed due to their expected lower returns; this is no longer the case. With additional resources going towards SRI funds in recent times, there are now numerous great SRI options for individuals that don’t require a clear compromise on expected return. This means that you as an investor can make a positive difference towards key current issues such as climate change, global violence, and equality, without forgoing the success of your plan or goals.
What is SRI
SRI funds come in multiple forms - there's no clear set of guidelines as to what constitutes a "Socially Responsible" investment, however, there are typically two main approaches:
The first and more common approach is using a 'negative screen', in which fund managers choose to cut out specific companies from their portfolio's should they be deemed 'bad'. This will often include specific industries such as military weaponry, fossil fuels, and adult entertainment.
The alternative approach is that of a 'positive screen', where fund managers will choose to only invest in companies which they deem 'good'. This could be based on whether companies support fair-trade agreements, focus on environmentally sustainable practices, or do volunteer work in the community, to give a few examples.
In practice, often a mixture of the two approaches will be applied – both getting rid of the ‘bad’ companies and giving additional weighting to the ‘good’ companies. Whilst all forms of Socially Responsible Investments will have a degree of subjectivity to them, they'll ultimately be geared towards making the world a better place.
Key Considerations
If you’re interested in SRI funds, there are a few things that you should consider prior:
Does the fund align with your personal values and principles?
Does the fund still have a respectable investment strategy?
Will you still be able to achieve your plan and/or goals with an SRI fund?
New Zealand SRI Fund Options
Consilium/Synergy provide a full range of SRI fund options – passively managed like the standard Consilium Portfolios (see an example link below).
“At a minimum, underlying investments will exclude companies involved in the production, manufacturing or significant sales of tobacco, controversial weapons, nuclear weapons or components developed or significantly modified for exclusive use in nuclear weapons, or auxiliary services related to nuclear weapons. In addition to these exclusions, SRI portfolios also have a significantly reduced exposure to greenhouse gas emissions and potential emissions from fossil fuel reserves, and an increased exposure to companies demonstrating sustainable business practices.”
Booster has a range of KiwiSaver SRI fund options – enabling you to put your regular contributions somewhere good.
“We use a combination of company reports, in-depth analysis and environmental, social and governance (ESG) factors to help us assess investment opportunities…An SRI investment fund is different because it actively excludes investments in socially controversial industries or businesses with damaging activities. Booster applies nine screening filters across our SRI funds, including weapons, fossil fuels and nuclear power production.”
There is a full range of SRI fund options available to investors in New Zealand. The above examples are of investment products that FoxPlan can provide to our clients.
Conclusion
If you are interested in socially responsible investing or would like to learn more about it – reach out to us today. What you choose to do today could make a massive difference in the future.
“The information contained in this publication is general in nature and is not intended to be personalised financial advice. Before making any financial decisions, you should consult a professional financial adviser. Foxplan Limited believes the information in this publication is correct, and it has reasonable grounds for any opinion or recommendation contained in this publication on the date of this publication. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product. Foxplan Limited accepts no responsibility for any loss caused as a result of any person relying on any information in this publication.
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