Why Ethical Investing is Growing in NZ & How to Get Started

Introduction

Ethical investing has seen significant growth in New Zealand as investors increasingly seek to align their investments with their values. This comprehensive guide explores the rise of ethical investing, its principles, and how to implement an ethical investment strategy.

Understanding Ethical Investing

What is Ethical Investing?

Core concepts include:

1. Basic Principles

   • Environmental impact
   • Social responsibility
   • Corporate governance
   • Sustainable practices

2. Investment Approaches

   • Negative screening
   • Positive screening
   • Impact investing
   • Engagement strategies

Types of Ethical Investing

Different approaches:

1. ESG Investing

   • Environmental factors
   • Social considerations
   • Governance practices
   • Integration methods

2. Impact Investing

   • Measurable impact
   • Social outcomes
   • Environmental benefits
   • Community development

Market Growth

NZ Market Development

Industry growth:

1. Market Size

   • Fund growth
   • Asset allocation
   • Investor adoption
   • Product development

2. Growth Drivers

   • Consumer demand
   • Regulatory changes
   • Performance evidence
   • Social awareness

Global Trends

International perspective:

1. Market Evolution

   • Global growth
   • Product innovation
   • Standards development
   • Performance metrics

2. Industry Changes

   • Regulatory framework
   • Reporting standards
   • Investment products
   • Market access

Investment Options

Local Options

NZ investments:

1. Managed Funds

   • Ethical funds
   • KiwiSaver options
   • Specialty funds
   • Impact funds

2. Direct Investment

   • NZ shares
   • Green bonds
   • Impact projects
   • Community investment

International Options

Global opportunities:

1. Global Funds

   • ESG ETFs
   • Sustainable funds
   • Thematic funds
   • Impact funds

2. Direct Access

   • International shares
   • Green bonds
   • Sustainable infrastructure
   • Impact projects

Implementation Strategies

Portfolio Construction

Building approach:

1. Asset Allocation

   • Ethical screening
   • Sector selection
   • Geographic spread
   • Risk management

2. Security Selection

   • ESG analysis
   • Impact assessment
   • Financial metrics
   • Risk evaluation

Investment Process

Implementation steps:

1. Research Phase

   • ESG analysis
   • Impact measurement
   • Financial assessment
   • Risk evaluation

2. Execution

   • Position building
   • Portfolio balance
   • Risk management
   • Performance monitoring

ESG Analysis

Environmental Factors

Environmental assessment:

1. Climate Impact

   • Carbon emissions
   • Energy efficiency
   • Resource use
   • Waste management

2. Environmental Management

   • Policy framework
   • Management systems
   • Performance metrics
   • Reporting standards

Social Factors

Social considerations:

1. Workplace Practices

   • Employee relations
   • Health and safety
   • Diversity policies
   • Training programs

2. Community Impact

   • Social contribution
   • Community engagement
   • Indigenous relations
   • Human rights

Governance Factors

Corporate governance:

1. Board Structure

   • Independence
   • Diversity
   • Expertise
   • Effectiveness

2. Corporate Practices

   • Ethics policies
   • Risk management
   • Transparency
   • Shareholder rights

Performance Analysis

Financial Returns

Return assessment:

1. Return Metrics

   • Total return
   • Risk adjustment
   • Benchmark comparison
   • Peer analysis

2. Performance Factors

   • ESG integration
   • Risk management
   • Market conditions
   • Management quality

Impact Measurement

Impact assessment:

1. Environmental Impact

   • Carbon reduction
   • Resource efficiency
   • Waste reduction
   • Environmental protection

2. Social Impact

   • Community benefits
   • Social outcomes
   • Employment creation
   • Development contribution

Risk Management

ESG Risks

Risk assessment:

1. Environmental Risks

   • Climate change
   • Resource depletion
   • Pollution
   • Biodiversity loss

2. Social Risks

   • Labor issues
   • Community relations
   • Human rights
   • Health and safety

Investment Risks

Portfolio risks:

1. Market Risks

   • Sector exposure
   • Geographic risk
   • Currency risk
   • Liquidity risk

2. Specific Risks

   • Company risk
   • ESG factors
   • Regulatory change
   • Reputation risk

Regulatory Environment

NZ Regulations

Local framework:

1. Regulatory Requirements

   • Disclosure rules
   • Reporting standards
   • Investment restrictions
   • Fiduciary duties

2. Industry Standards

   • Best practices
   • Certification
   • Reporting guidelines
   • Performance measures

Global Standards

International framework:

1. Global Principles

   • UN PRI
   • SDGs
   • Paris Agreement
   • Industry standards

2. Reporting Framework

   • GRI standards
   • TCFD framework
   • SASB standards
   • Impact reporting

Investment Platforms

Local Platforms

NZ access:

1. Traditional Providers

   • Fund managers
   • KiwiSaver providers
   • Investment platforms
   • Financial advisors

2. Specialist Providers

   • Ethical funds
   • Impact investors
   • Community finance
   • Green bonds

International Access

Global platforms:

1. Investment Platforms

   • Global providers
   • Specialist platforms
   • Fund access
   • Direct investment

2. Research Tools

   • ESG ratings
   • Impact metrics
   • Analysis tools
   • Research providers

Future Trends

Market Development

Industry evolution:

1. Product Innovation

   • New vehicles
   • Access improvement
   • Impact measurement
   • Reporting tools

2. Market Growth

   • Asset allocation
   • Product range
   • Investor adoption
   • Performance metrics

Technology Impact

Digital development:

1. Analysis Tools

   • ESG data
   • Impact measurement
   • Performance tracking
   • Risk assessment

2. Platform Development

   • Access improvement
   • Trading systems
   • Reporting tools
   • Analysis capabilities

Implementation Guide

Getting Started

Initial steps:

1. Strategy Development

   • Goal setting
   • Value alignment
   • Risk assessment
   • Implementation planning

2. Portfolio Setup

   • Account opening
   • Fund selection
   • Position building
   • Risk management

Ongoing Management

Regular tasks:

1. Portfolio Monitoring

   • Performance tracking
   • Impact assessment
   • Risk management
   • ESG analysis

2. Regular Review

   • Strategy assessment
   • Impact evaluation
   • Performance review
   • Position adjustment

Conclusion

Success factors include:

• Clear values
• Proper research
• Risk management
• Regular monitoring
• Impact measurement

Key considerations:

• Investment goals
• Value alignment
• Risk tolerance
• Performance requirements
• Impact objectives

Additional Resources

• ESG research
• Impact metrics
• Investment platforms
• Educational materials
• Professional associations