Environmental Social Governance (ESG)

What it takes to be a Responsible Investment Leader

By Rebekah Swan
Chartered Member of Institute of Directors (CMInstD) Managing Director / Head of Clients New Zealand

This week the Responsible Investment Association Australasia (RIAA) launched its landmark annual study, the Responsible Investment Benchmark Report Aotearoa New Zealand 2021. The RIAA benchmark report is the most comprehensive review of the responsible investment sector in Aotearoa New Zealand and covers the investment practices of 47 financial institutions, including AMP Capital.

This year’s Responsible Investment Benchmark Report shows that the responsible investment market in Aotearoa New Zealand continues to grow. The market reached a record $142 billion in 2020, with responsible investment assets growing at more than twice the rate of overall professionally managed investments. This shift is being fuelled by changing consumer expectations, increased regulation, strong financial performance and the rising materiality of different social and environmental issues.

Demand from institutional investors was the most predominant driver of growth in responsible investment funds. There is a growing acceptance that ESG factors impact the financial performance of investments, as the market shows increased demand for decarbonisation, net zero carbon emissions and TCFD reporting. Another key driver of market growth is the increasing interest from investors in aligning investments with their mission/values and a widespread acceptance that ESG factors provide financial value.

A new development this year is Responsible Investment Leaders 2021 – a recognition of investment managers in New Zealand that demonstrate leading practice in their commitment to responsible investment. Responsible Investment Leaders are those that achieve a score of 15 out of 20 or above on RIAA’s responsible investment scorecard which covers four key areas or pillars: commitment to responsible investment, systematic processes to manage ESG risk, strong and collaborative stewardship, and allocation of capital to target sustainability outcomes.

I am proud to say that AMP Capital New Zealand has been included as one of the responsible investment leaders for 2021.

This acknowledges our commitment to responsible investing and attributes as an investment manager. It is encouraging to see that nearly half of investment managers in New Zealand are responsible investment leaders, practising a leading approach to responsible investment and contributing to raising standards across the industry.

A key finding of this year’s report is that sustainability-themed investing has grown dramatically as a responsible investment approach. Investment in climate change, such as renewable energy and energy efficiency, and natural capital-related themes such as sustainable land and water management, make up the vast majority of these investments. This aligns with the sustainability themes most commonly covered by investment managers and, for the most part, are aligned with consumer demand.

While I am encouraged by the findings in the report, there is no room for complacency. Despite significant sums of capital committed to responsible investment in New Zealand and internationally in 2020, we remain far from being on target to achieve Paris Agreement commitments and deliver on the Sustainable Development Goals (SDGs). There is still a significant role for finance to play in creating a more sustainable world.

Responsible Investment Benchmark Report

Aotearoa New Zealand 2021

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Important notes

This blog post has been prepared to provide general information and does not constitute financial advice in accordance with the Financial Markets Conduct Act 2013. An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice. While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate, complete or timely and do not make any warranties or representations in respect of results gained from its use. The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP. These views are subject to change depending on market conditions and other factors.

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