Ethical investment wins
After my recent battles with the Government over the investments of the NZ Super Fund, and its lack of an ethical investment strategy, I was pleased to see that an ethical fund has topped the UK all companies growth league.
“The Co-operative Insurance Sustainable (CIS) Leaders trust, a fund that buys shares only in ethical and green companies, outperformed other unit trusts in the UK All Companies sector in the year to the end of January. “
So you don’t have to invest in cluster bombs to make a return, despite what Michael Cullen tells us. If I had any money I’d invest in CIS! Of course, because we want overall resource use to drop, I hope that the growth in resource use by the firms that this fund has invested in are matched by the drop in resource use by planet destroying firms.
February 16th, 2007 at 6:33 pm
I have heard that ethical investment funds often outperform the others.
This is an important issue in my view, and I am pleased that the Greens have raised it. If Labour wants to talk about sustainability, then they should be working to set the right sorts of guidelines for the super fund investment. Cullen’s views don’t wash with me.
Go Greens!
February 16th, 2007 at 6:45 pm
Oh oh oh - I’ve been meaning to ask someone, and this seems like a good forum…
Will there be ethical investment schemes in the Kiwisaver scheme?
Because if not there should be
February 16th, 2007 at 7:23 pm
Good question. I’ve been looking into this lately and it seems that the short answer is no. The five default providers don’t seem to be offering ethical options. One of them, Mercer, has an ethical fund overseas but doesn’t seem to be offering it in NZ. I’ve written to them to find out more and will post results on Frogblog when I find out.
There will be other scheme providers in due course. Maybe one of them will provide an ehtical investment option….
February 17th, 2007 at 1:28 am
Government makes policy and statement of direction all the time. Left or right wing, I think people can acknowledge that good investment is about making a total profit - and money is only one factor. I think ethical investment schemes are a good idea, just as we choose a mix of local and foreign investment ratios.
I tried to find a stable investment fund that complied with Aussie Super requirements and supported the concept of ethical investments - trickier than it sounds.
Ethical funds do not necessarily out perform others, but as I said, money is only one metric.
February 17th, 2007 at 12:46 pm
Disclaimer: I am a Credit Union (voluntary) director.
Credit Unions have partnered with Mercer to offer the Mercer Kiwisaver scheme to Credit Union members under a Credit Union brand. I think people looking for an “ethical investment” kiwisaver scheme should give serious consideration to the Credit Union/Mercer scheme.
Why?
Credit Unions are cooperatives - owned and controlled by the members democratically on a one member one vote basis. Funds deposited with the Credit Union (ie, not kiwisaver contributions) are used to lend to members in your local area, and the Credit Unions provide a banking service to members, some of whom wouldn’t be able to access these services from other institutions. This is local, ethical use of money.
I don’t know a huge amount about Mercer myself.
While the Mercer Kiwisaver scheme might not offer an ethical investment option (yet), if you invest through the Credit Union scheme, you have the option of participating in the democratic functioning of your Credit Union, and (if other members agree with you), putting presure on Mercer to provide an ethical option.
I certainly support ethical investing.
February 17th, 2007 at 1:07 pm
mmm..!..green-spam..?…
or just bank-spam..?
you come here..to a discussion on the merits of ethical investment..
to flog a bank-scam that you ‘don’t know a huge amount about..myself..’
and concede isn’t ethical..
would ‘p*ss-off..!.you..with your spamming ways.’..!
be too strong an admonition..?
phil(whoar.co.nz)
February 17th, 2007 at 3:18 pm
Check out my post from last week on this topic.
M
February 17th, 2007 at 3:56 pm
Phil
I don’t intend to spam. I admit I am not entirely sure what the etiquette is for this forum and whether I have crossed some line. I apologies to you, because I appear to have offended you, and I hope I haven’t offended too many people.
Can I say, in my own defence - that I believe in ethical investing - that I joined the Credit Union movement after evaluating the alternatives and deciding that a Credit Union was the most ethical option. I became a director because I believe in co-operatives and democratic control and sometimes you have to put your actions where your beliefs are. I don’t make any direct personal gain if people join Credit Unions or use their products (it does make me feel good though, and I genuinely want Credit Unions to succeed.) However, I do use a Credit Union myself, I am a part owner of it and I am responsible for running it, as is every Credit Union member.
What criteria should I use to judge if I am spamming or not? Should I not voice my opinion about investing simply because I care enough to become involved with a Credit Union?
I believe in wind energy too - and I voice my opinion in appropriate fora in support of it - should I not do this because I own shares in NZ Windfarms? (I don’t have any shares, but probably would if I had the money to invest)
Certainly if you know a better kiwisaver scheme let us know what it is. I was very interested to hear from Russel that Mercer had ethical investment schemes overseas and perhaps my enthusiasm got away on me.
Cheers
February 17th, 2007 at 5:23 pm
Phil,
You come here all the time promoting your site and its supposed attractions…don’t be so quick to judge others mon frere. You have your heart in absolutely the right place but perhaps the ego needs the occasional reigning in…
Alex’s post provided a disclaimer and was pretty obviously just trying to broaden the discussion somewhat.
It grates that so many of the posters here (you know who you are fellas) want only to argue, criticise and pour blame and scorn on the discussions taking place. Debate is good, ideological conversion ain’t about to happen.
Here’s a hint…this blog isn’t really the forum for debating core Green principles. These are unlikely to change due to a bit of derision and name calling and complaining about how much of your hard earnt money the Greens would like to spend improving the lot of our and future generations.
Sorry to veer off-topic.
The following link has some interesting info and links to the UN’s efforts to promote ethical investment.
http://www.sustainablefuture.info/SITE_Default/SITE_Investments/invest ments.asp
February 17th, 2007 at 5:38 pm
Phil
I think that having offered the disclaimer and also having posted on other topics here, Alex has a perfect right to post what he posted. We let all sorts of people post and we argue points with all of them.
His points about Credit Unions are not false… they are to be preferred to commercial banks in almost every respect… but often struggle with international transfers and the like. I have used them in the past and found them more responsive and responsible than the commercials.
That is doubly true when the banks are owned by Australians.
respectfully
BJ
February 17th, 2007 at 6:38 pm
smokey..said..
“..You come here all the time promoting your site and its supposed attractions..”
um..i don’t really need to do that..dear heart..
in the last 24 hrs i had 97,135 hits at whoar..
so..i really don’t need to come here ‘to promote my site..and its’ supposed attractions..’..?
do i darling..?
just so you know..i come here to fight for the things i believe in..
phil(whoar.co.nz)
and bj..his first comment was spam..
February 17th, 2007 at 7:45 pm
Thanks Alex. Appreciate your post and disclaimer. Will look into it.
Russel
February 17th, 2007 at 11:14 pm
It seems that phil has been under scrutiny by some …
phil:
From my perspective, I enjoy your posts much more often than not.
You can be “a bit of a pain” sometimes (as can most of us) and very occasionally you turn “being a total pain” into an art form!
I find you supportive when it matters, at times brilliant, and Green (or green?) to the core … “One of the good guys”.
Everyone:
Let’s cherish excentricity and excentrics (and gently tell people if/when they say things that cause discomfort.)
February 18th, 2007 at 9:51 am
Phil,
Bit of respect please…..calling me “dear heart” and “darling” does your credibility no good. As I said, reign in the ego a bit.
I’ve called you before on being a self-promoter here so you can’t just say it hasn’t happened. So calling others on it is a bit on the nose.
Most of us are here for similar reasons to those you mentioned, you don’t have a monopoly on outrage and good intentions fella.
Do all those clicks make you better than others? I’ve been to your site a few times and enjoy some of the topics you post but, for the most part, you are a news aggregator, recycling other peoples words with no analysis of your own. Which is all good if you like that sort of thing but it cetainly doesn’t give you any special right to judge.
I’m not looking to start any tit-for-tat crap - this is not a forum for that. All I ask or suggest is that you consider your relative importance in the scheme of things and keep the posts relevant.
Respectfully,
Smokey
February 18th, 2007 at 10:47 am
a few things smokey..
if u don’t want me to bite back..(’dear heart’.?..’darling’..?..viscious..!..eh..?..are you bleeding..?)
don’t slag off my pride and joy/work..eh..?
and what all”those clicks’ mean is that the messages i am promoting (vegan/animal rights/childrens’ rights/social justice/green/etc etc)..that are thread in amongst that ‘just news aggregating’..
(give it a go sometime..dear heart..see ‘how easy’ it is..eh..?
and more importantly..do it well enough to stand out from everyone else
enough..that you get an audience….eh..?)
those messages/’radical’ideas are being read/seen by a sh*tload of people..eh..?
(and that is most gratifying..’ego’-boosting..eh..?..)
and as for your claims of their being no commentary/original material..”no analysis’..they are just bullsh*t..eh..?
if that indeed were true..i just wouldn’t be getting those ‘clicks’..eh..?
and hey..three of my top five most ‘clickers’ are google-bot threads..
so..just by that fact..those messages are getting out (daily) to a hell of a lot more people than just the 97,000 + my ‘click’ records show…eh..?
(are you an auckland green lurking under that smokey-cloak/disguise..?…by any chance..?..that would ‘figure’..and would explain the bitter/sour grapes of most of your mumbles..have i ’slam-dunked’ you/your ideas on a regular basis in the past..dear heart..?
and um..why don’t you use your real name..?..’smokey’..?)
and i do wonder where you get your claim of me claiming ‘any special right to judge’..
if you call that me saying what i think ..well..fair do’s ..i guess..
February 18th, 2007 at 11:40 am
eredwen,
The hippy earth-mother role is causing me discomfort.
Joke.
Back on topic, that fund performance is the exception, not the rule. I don’t think it is ethical for the government to invest our super in anything, be it plants or bombs, which delivers a poor return. If the fund offers good returns, and is “ethical” (whatever that means), then good.
February 18th, 2007 at 12:11 pm
pel,
That’s the price you have to pay for visiting frogblog.
We have this habit of respecting people and being concerned about the way in which individuals are treated.
Please do feel free to return to the testosterone dominated websites that you are used to!
The “hippy” bit is an interesting assumption!
February 18th, 2007 at 1:13 pm
>>Please do feel free to return testosterone dominated websites that you are used to
Capitalism Bad, Tree Pretty?
>>That’s the price you have to pay for visiting frogblog
It is indeed. As well as off-topic responses.
Meanwhile, is it ethical to limit public investment of super funds to a narrow range of portfolios?
February 18th, 2007 at 2:11 pm
the only narrowing of portfolios needed..is narrowing/eliminated of arms/tobacco..(y’know which ones)..from the list of govt investments…
quite simple really..
phil(whoar.co.nz)
February 18th, 2007 at 5:34 pm
Phil,
This is tiresome and circular. My points were pot meet kettle and keeping to the topic. One observation and one request. Que rant….
The way you address people when challenged is fairly immature and unnecessarily combative.
So………like………..later…….dude……….eh?
With less respect,
Scott
February 18th, 2007 at 6:35 pm
Phil
I don’t think it was spam. I don’t think he intentionally troubled this forum for the sole purpose of flogging his products. The fact that he did flog them makes it questionable and I understand your opinion, but he’s also contributed elsewhere without flogging anything at all.
More to the point, you know darned well what a spammer is, an anonymous lowlife who devours network bandwidth wholesale. His was a single post, largely on-topic and if somewhat self-serving still honest and NOT anonymous.
So I reserve the epithet for someone who deserves it. Heckfire… against the death penalty I may be but if its a spammer I’ll bring the rope.
respectfully
BJ
February 18th, 2007 at 9:16 pm
peter asks:
“is it ethical to limit public investment of super funds to a narrow range of portfolios?”
there is a real conflict between the superior diversification that an unrestricted portfolio allows, and the ills that unrestricted investment can perpetuate. but as i wrote last week (see link in my comment above):
“As more of the environmental and social costs of “business as usual” are internalised, ethical investments can expect to outperform the market as a matter of course. As cleaner business becomes the norm the concept of a diversified portfolio will start to make financial and ecological sense.”
i think that its entirely achievable, and its also the logical conclusion if carbon is priced and ecological impact is addressed. imho tax reform is one of the most important things the greens can be driving. its the only way to realistically address impact on the scale needed.
Mike
February 18th, 2007 at 10:58 pm
An emotional subject to be sure. Yet to be crudely brief and uninteresting, I have a sum which I wish to ethically invest on behalf of my brand new daughter. Anyone care to suggest a good resource where one may research these funds?
Regards to you all.
February 18th, 2007 at 11:19 pm
Moral Panic, try Prometheus.
February 18th, 2007 at 11:30 pm
Cheers Russel. Will investigate. Good evening to you.
February 18th, 2007 at 11:32 pm
moralpanic,
Congratulations! and best wishes to/for that brand new daughter of yours.
I hope you will enjoy each other’s company for life.
February 19th, 2007 at 12:46 am
>>arms/tobacco
Seems rather hypocritical when we a) have military forces and b) tax tobacco highly.
mikeymike
But we need to diversify offshore. What countries/companies internalise all social and environmental costs to the level where you’d decide they are “ethical”? What about their suppliers? Their financial backers? Where do you stop testing, and when? How often do you check compliance? How? How much does this cost?
Would we invest in Boeing? How about Microsoft? Pfizer?
February 19th, 2007 at 9:26 am
PEL, I reckon you’ve gotta be careful not to fall into a form of argument which says the existence of grey proves that black and white doesn’t exist (or even lighter or darker forms of grey).
Yes there is a lot of grey because companies are conglomerates and involved in a wide range of activities. But there is also black (or blacker) and white (or whiter). Ethical inveting means avoiding the black and buying into the white and accepting that there will still be plenty of grey.
As an aside the language around this subject has really unfortunate racial overtones.
February 19th, 2007 at 10:29 am
Is Boeing black?
February 19th, 2007 at 10:40 am
… he was Geman…
its a case of putting a stake in the ground somehwere. starting with a companies carbon profile and comparing it to an industry benchmark would be a good start…
Mike
February 19th, 2007 at 11:02 am
Everyone’s ethics are different, so I’m not sure the government can pursue “ethical investment” on behalf of its citizens. Who decides the criteria? Would selection be done in a democratic way?
Carbon profile doesn’t bother me….
February 19th, 2007 at 11:20 am
PEL
As far as I am concerned Boeing is as black as sin… for their role in continuing to prevent cheap access to space. Your Mileage May Vary.
BJ
February 19th, 2007 at 11:20 pm
PeterExitsLeft,
Simple questions to ask, not so simple to answer - which is why the answers aren’t generally decided in blog discussions.
The design of “Ethical” investment portfolios is underrtaken by fund managers who commission research from specialist organisations (e.g. SIRIS in Australia amongst others). Yes, research into supply chains is a major part of that.
I don’t know the details on how often research organisations re-calibrate re a particular company, but once they’ve done the core research they generally maintain a watching brief for signiifcant changes in operations.
The cost can be significant, but then so is the cost of a standard fund manager. The cost of not choosing to invest ethically can be that you not only contribute to ecological degradation, sweatshop labour and poorly accountable management but that you, as an investor, can be exposed to legal and reputational risks from all of the above. Note that these are all risks that can seriously affect share prices, note Enron, Bhopal and Nike.
“Ethical” Investment was a reaction from people wanting to take a stand against the Vietnam War and Apartheid South Africa. It has grown from there to cover a range of issues and tastes.
It’s true that people’s ethical values differ which is why fund managers determine the selection/exclusion/engagement strategy for their fund and investors choose the fund they prefer.
However, the concept has ecolved substantially over the past few decades. For some time it has been used interchangeably with “Socially Responsible Investment” (or SRI) but in the mainstream financial markets overseas is now more commonly called ESG (Environmental, Social and Governance) to reflect the view from the mainstream perspective that the business case for this investment approach is about minimising a Fund’s risk exposure with regard to these factors - just as any sensible fund manager would minimise risk exposure to a range of financial factors.
For more info on ethical investment, SRI or ESG check out the Council for Socially Responsible Investment (www.csri.org.nz) or the Ethical Investment Association (www.eia.org).
February 20th, 2007 at 1:00 am
kiwinuke,
Thanks for that !
I learnt a lot with very little effort on my part.
February 20th, 2007 at 9:33 am
Thanks kiwinuke.
Then there’s the wider ethical question: is it ethical to knowingly increase risk by narrowing fund selection.
Personally, I’d rather the government invest MY money based on the criteria of low risk, high return, rather than other concerns.
February 20th, 2007 at 11:28 am
yep, cheers kiwinuke. concise. just how we all should be!
Mike
February 20th, 2007 at 12:04 pm
Low risk, high returns is the same deal as Eco-Tax - you are not factoring in externalities. Investing in weapons companies might make lots of money, but if NZ tax payers then have to shell out $5M on a land-mine clearing donation and lose a few troops in Afghanistan because of it, then we haven’t factored in the “net profit”.
I liked the comments around SRI and ESG. That would still leave a huge choice.
Things that p*ss me off that we could exclude: Animal Testing, Japanese Fisheries. Land mines. Alcohol and Tobacco companies. Zimbabwe. The Labour Party. Cindy Kiro.
February 20th, 2007 at 12:34 pm
Peter,
The “ethical investing narrows fund selection” argument is a pretty standard red-herring that gets thrown around quite a lot from mainstream fund managers who are either out of their depth on this issue or feel threatened by the growth of a sector they don’t have a stake in.
All fund management is about making portfolio selection choices - i.e. necessarily narrowing the range of stocks that a fund invests in. Otherwise why bother with a fund manager when you could just invest in the index? (i.e. invest proportionally in all shares on the stock exchange you’re interested in).
The key is getting the risk/return tradeoff right. Some investors want a fund that is higher return and don’t mind higher risk. Some want lower risk and may be willing to accept slightly lower returns to achieve that.
Your question can be turned on its head to ask:
Is it ethical (or even prudent) to knowingly increase risk by not taking other available information into account? (such as a company’s risk of being caught out in a major environmental, civil or governance scandal that will rock their share price).
Your question seems to have missed the point I made in my earlier post. Ethical Investment, especially in it’s latest ESG incarnation, is all about taking account of all available information in assessing investment risk. In the past fund managers looked only at financial data, which is largely backward-looking though does allow for useful forward projections. Research into Governance structures, environmental safeguards and such things as supply chains, social impacts and workplace issues allows a much fuller assessment of the types of risks that can otherwise blindside an organisation and it’s investors.
Consumer expectations and satisfaction form a key part of share value. Those companies that act in ways which undermine that are increasingly finding that they it not only hits their market share and their profit but also their share price and investor interest.
February 20th, 2007 at 12:54 pm
>>The key is getting the risk/return tradeoff right.
Yes. I’m not against investing in organic farms, alternative power, high tech, alcohol, drugs, etc. In fact, I’m all for it, so long as the returns are there.
My problem is having my money invested in something because it serves someone else’s political agenda, as far as any investment can be politically neutral. The pledge cards weren’t an investment, but…potentially dangerous ground.
I do understand your point about taking into account all information regarding risk.
Which preferences are deemed ethical, and which aren’t? I have no qualms about investing in Boeing, but I can understand why peace activists might not be.
Would Boeing form part of an ethical investment fund?
February 20th, 2007 at 11:32 pm
Tigger : The Labour Party.
You’re right. They are definitely not an ethical investment. Also, they are high risk : you give them your money, they don’t pay it back…
Peter : Boeing would certainly not be on an ethical investment list. That would be twisting things to the point of making the term meaningless… like extending the definition of “organic” to include GMOs. Even without the military component, any decent assessment of risks would have to factor in environmental concerns : the likelihood that Boeing will take a nosedive because of higher oil prices, and taxes and restrictions on greenhouse gases. Non-ethical fund managers will tend to discount this sort of stuff, or take profits in the short term and sell out when things turn ugly. An ethical fund needs to be in for the long haul, and favour investments which are sustainable, rather than functioning in a predatory manner.
As for serving a political agenda… I think all ethical funds should be quite clear about what they invest in and why. After that, you pays your money and you makes your choice.
February 21st, 2007 at 3:21 pm
>>you pays your money and you makes your choice.
I pay my money (well, IRD takes it regardless) but the government makes the choice.
Therein lies the problem…
July 2nd, 2007 at 10:24 pm
clptrp aside for a moment our union provides financial advice on KIWISAVER and have done some preliminary research on ethical funds - in the near future - some of the funds will have an ethical component - so we can exercise our demand together and try to raise the bar by going with the higher ethically proportioned funds.
As a person who knows what a pigovian tax is (see article link above ala mikeymike’s post and associaated wikipedia link) it seems to me that this is quite fair. let the market decide and then when government starts to tax investment to affect behaviour these funds will be less impacted and us ethical investors suddenly become very smart.
Its a shame that they are so offlimits by the business loby - they are economically brilliant imho.
I am going to hold out until closer to October 1 before I choose my provider. (by the way go greens for sticking it to parliament on the satire rubbish (hi mom)).