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Mindful Money Ethical and Impact Investment awards

The inaugural awards event recognised key industry players in the ESG arena – Matthew Martin has the lowdown on the individuals, companies and funds performing at the top of the responsible investment space.

Responsible and ethical investment is nothing new to an industry that often measures success at the bottom line but as global issues like climate change and wealth inequality keep making headlines it is getting harder and harder to ignore.

So it came as no big surprise to Mindful Money founder and chief executive Barry Coates that so many companies and individuals were keen to support the first Mindful Money Ethical and Impact Investment awards held in Auckland at the end of June.

Coates and Dr Rodger Spiller, profiled in this edition of ASSET, have been at the forefront of ethical investment conversations for decades. And slowly but surely investors themselves are forcing those slow to change their attitudes to what could save the world from rampant consumerism – socially responsible and ethical investment.

“It should come as little surprise that credible ethical investment funds do well financially, as well as doing good,” says Coates.

He says there is a strong relationship between well-managed companies and companies that operate with high sustainability standards – they benefit from loyal customers, motivated staff and pay no fines for environmental damage.

“Returns for ethical funds are also boosted by avoiding social, environmental and climate risks.

“For example, after repeated warnings of climate risk, ethical funds have avoided fossil fuels. The returns for other funds have suffered as the value of fossil fuel companies plummeted over the past six years.”

Coates says excess returns may seem surprising to those who assume markets reflect all available knowledge.

However, the link between ESG factors and share prices has only recently entered the mainstream and is still not incorporated into many financial models.

“A vivid example of information failure has been the strength of climate denial in countries like the USA, and the lack of understanding of climate risk.”

He says evidence of strong ESG returns has been shown in research studies over the past two decades, including a review of thousands of studies by Morgan Stanley, and a similar analysis by Hamburg University.

“At the same time, annual surveys of the public by Mindful Money and the RIAA show there is a growing understanding that ethical policies are good financially as well as for people and the planet.

“It is one of the factors driving the rapid growth of ethical investing in NZ and internationally.

“As the chief executive of BlackRock, the world’s largest asset manager commented “... the question used to be, why invest ethically? Now the question is why not?”

The big winner

Pathfinder Asset Management was the big winner on awards night picking up the Best Ethical KiwiSaver Provider and Best New Ethical Fund awards and was highly commended in the Best Ethical Retail Investment category.

Pathfinder was set up in 2009 by its current CEO John Berry and CIO Paul Brownsey and is part of the global wealth management company Alvarium.

Berry says it was a wonderful feeling for the team at Pathfinder to see their hard work rewarded.

“We’ve been working hard and pushing boundaries in ethical investment for over a decade, and it feels amazing for the team to have this recognised,” he says.

The award judges said Pathfinder had “... raised the bar with its KiwiSaver funds, providing the public with opportunities to invest in sustainable themes such as renewable energy and access to water and to invest in impact companies that create social and environmental benefits”.

It should come as little surprise that credible ethical investment funds do well financially, as well as doing good

Barry Coates

“John Berry and Paul Brownsey have shown public leadership on ethical investment,” they said.

Berry says the awards help show ethical and responsible investment has become mainstream and is now widely adopted by fund managers, financial advisers and investors.

It’s hard to pinpoint any single event that inspired Berry and Brownsey to focus so intently on ethical investment, Berry describes it as “a series of nudges”.

“These nudges have been new levels of awareness from important relationships – like having kids and working with Ngai Tahu.

“These gave Paul and I a better understanding of inter-generational care and kaitiakitanga but there have also been impactful one-off events that have nudged us along like meeting Al Gore and learning about levels of humanproduced toxins in the Mariana and Kermadec trenches.

“Ultimately, I think, it’s where both our hearts and heads are,” Berry says.

As the momentum behind responsible investment grows Berry says an incredibly wide range of investors are now using their funds and just recently Pathfinder saw its KiwiSaver funds under management hit the $100 million mark.

Berry says more financial advisers are recommending their clients use Pathfinder’s funds, as well as charities and not-for-profits.

“High net worth investors will also use us because they care about the realworld impacts of the way they invest, and then there are KiwiSaver investors who can’t resist our combination of great returns and ethical investments.”

Pathfinder’s funds have been inspired by the United Nations’ 17 Sustainable Development Goals and they channel their investments into four areas where Berry says they can generate the biggest impact – both in terms of wellbeing and wealth.

“We are after the kind of impact that helps achieve the UN’s goal of “a better and more sustainable future for all”.

“And at the same time, we need to generate wealth for our investors through good returns.”

Pathfinder’s four impact investments are renewable energy, energy efficiency, water and technology.

We’ve been working hard and pushing boundaries in ethical investment for over a decade, and it feels amazing for the team to have this recognised

John Berry

“When deciding which companies we want to support in these areas we use a mix of our own financial analysts, our environmental scientist and external research.

“Our investment team manages our portfolios, and are ultimately overseen by our investment committee and ethics committee.”

They plan to keep Pathfinder’s investment process robust, researchbased and repeatable in terms of good returns.

“We’re hugely ambitious about our vision of funding a lasting transition to a more ethical world and are just getting started.”

Another big achiever

The other big winner on the night was the team from Harbour Asset Management who won the Most Ethical Retail Investment provider award.

The judges said they were particularly impressed by Harbour’s strong research capability and analysis of Australian and NZ companies.

“They have demonstrated in-depth engagement with companies, with examples of how they have helped to improve social, environmental and governance performance.”

Harbour’s managing director Andrew Bascand is passionate about decarbonisation and has been since setting up shop in Wellington back in 2009.

Harbour signed up to the UN’s PRI in 2010 and has not looked back.

According to industry analysts Morningstar, “Harbour sets the standard in the local industry for transparency, disclosure, and investor engagement. In our view, Harbour is one of the strongest stewards of investor money in NZ.”

“We are really excited, there was a lot of work that went into our submission, highlighted by the amount of engagement we had with the companies over the last year that we think made a significant difference,” says Bascand.

He adds, a company can start its responsible investment journey by excluding some investments “... but if you want to make a difference you have to be purposeful with your money and engage with it – you get a lot more satisfaction from it”.

Being an optimist, Bascand says ethical investment has opened up a world of opportunity.

“Right now it’s great the dialogue is focussing a lot more on decarbonisation and climate change and that reflects two forces – we are actually beginning to see more and more climactic events that are both unusual and clearly linked to the warming of the planet.

“Secondly, there’s been a real pick up, not just in NZ but globally in political conversations regarding action on decarbonisation and a recognition that if we add up all the current policies in the world we are still some way off being on a 1.5°C trajectory – there’s a lot to do.”

Bascand says people should be getting excited about the purposeful distribution of capital into technological innovation.

For example, he says we can’t just think about how we produce electricity, we have to think about how transport works, how industries use energy and how we can improve our agricultural emissions.

“There is a list of cutting edge science that will come to market in the next few years and I am very optimistic that purposeful capital will make a difference here.”

But you need strong leaders to grasp hold of the situation and who then do something tangible to address the problem.

“Recently, we had Fortescue Metals Group announce they will joint venture with Ngai Tahu and potentially some other large NZ companies to invest in a large green hydrogen plant in Southland,” says Bascand.

He says almost everyone in the investment scene now recognises that within five years what they do with their capital will have both a financial and sustainable development goal attached to it.

“It’s not sufficient to just be excluding the large carbon emitters because the irony here is it’s often those large carbon emitters who will eventually be the path to a Paris 1.5°C world.”

Those large emitters may be uninvestable today but need to be encouraged to change their business practices and technology.

Bascand says there is a handful of carbon emitters “... who have decided they’ll be the last people on the planet and are not going to change”.

But he says there’s hope when you consider some of the giant steps Contact Energy have made locally by turning off gas plants and building larger geothermal electricity projects.

Bascand points to some recent statistics released after the first four months of the electric vehicle rebate scheme with the sale of EVs moving from 3% to 12%.

“It’s going to take 10 years, but we’ve got to make a start.”

After being started by the government in 2010 as a superannuation fund, Harbour now has around 130 large investors including some of the banks, KiwiSaver funds managers, philanthropic organisations and many iwi groups, along with about 400 financial advisers.

“They have all joined us on the road to sustainable investing ... now we are talking to them about how we bring them along to the next level.

“We have an increasing number of advisers who are focussed on sustainable actions and are wanting to listen to our stories ... and their clients are interested in these stories as well.

He says Harbour continues to engage with global leaders and are subscribing to global data that allows them to understand combinations of climate change and other sustainable global measures.

Winners and highly commended

Best Ethical Retail Investment Fund Provider

• Winner: Harbour Asset Management

• Highly commended: Pathfinder Asset Management

• Judges’ comments: The judges were particularly impressed by Harbour’s strong research capability and analysis of Australian and NZ companies. They have demonstrated in-depth engagement with companies, with examples of how they have improved ESG performance.

Finalists: AMP Capital, Booster, Mercer.

Best New Ethical Fund 2021

• Winner: Pathfinder Asset Management

• Judges’ comments: Pathfinder has released several exciting new funds, including the ethical growth fund. The fund avoids investments in companies that cause harm, practises active ownership, but invests in companies with positive impacts, such as solar energy, mental health, women’s livelihoods and social housing.

Finalists: Booster, Harbour, Mint.

Best Ethical KiwiSaver Fund Provider

• Winner: Pathfinder Asset Management

• Judges’ comments: Pathfinder has raised the bar with its KiwiSaver funds, providing the public with opportunities to invest in sustainable themes such as renewable energy and access to water, and in impact companies that create social and environmental benefits.

Finalists: Booster, Generate, Mercer, Simplicity.

Best Ethical Financial Adviser

• Winner: Dr Rodger Spiller, Money Matters

• Judges’ comments: Rodger Spiller’s entry stood out for his strong research and thought leadership over many years. His approach is flexible and thorough to meet clients’ needs and aspirations.

Finalists: Ethical Investing NZ, Rutherford Rede.

Most Effective Investment Fund for Climate Action (no overall winner)

• Winner: Climate Venture Capital Fund

• Highly commended: New Zealand Green Investment Finance

• Judges’ comments: There was a tie for this category. The judges were impressed by the potential of both of these funds but recognised they are both at an early stage in their development. So they have given two highly commended awards and look forward to their entries next year.

The Climate Venture Capital Fund is a start-up fund that aims to accelerate the hugely important role of investment for climate solutions.

The NZ GIF has a clear purpose and well-developed measures to assess the impact of investments. The judges look forward to seeing the fund become a catalyst for other investors as well as investing directly.

Best Impact Investment Fund

• Winner: Community Finance

• Highly commended: Impact Enterprise Fund

• Judges’ comments: The judges recognised the track record in finance for community housing that preceded the formation of Community Finance. The Salvation Army Community Bond was an innovative offering to finance 128 houses and apartments in Auckland, including mainstream financing from Generate KiwiSaver. This provided a model for the launch of the Aotearoa Pledge aiming to raise $100 million for social housing.

The Impact Enterprise has broken new ground as NZ’s first wholesale impact fund. They have put in place robust systems for finding prospective investments, working with them to help them become investible, and doing due diligence. They have put in the hard work to create a pipeline of prospects and are now building a strong portfolio.

Finalists: Purpose Capital, Soul Capital.

Best Media Reporting on Ethical Investing

• Winner: Rob Stock, Stuff

• Highly commended: Deleted documentary, Stuff Circuit

• Judges’ comments: Rob Stock has consistently provided excellent articles on ethical and responsible investment issues over many years. He has undertaken new research and provided fresh perspectives to enable readers to make informed decisions.

The Deleted documentary by Stuff Circuit – The judges were impressed by the in-depth research and investigation, exposing the violations of the rights of Uyghur people. The documentarymakers were innovative in their multimedia treatment and their follow up on the role of NZ funds and companies.

Finalists: Daniel Smith/Good Returns, John Berry in collaboration with Stuff.