Survey finds demand outweighs ethical outperformance doubts

This article originally featured on Investment News and was written by Investment News. 

Less than half of New Zealanders expect responsible investments to outperform, according to a new survey, but that hasn’t dampened cross-generational demand for products playing to the theme.

The Responsible Investment Association of Australasia survey, carried out in partnership with Mindful Money, found that for just “40% of the [NZ] population, investing responsibly makes financial sense, as they believe that responsible and ethical funds outperform traditional funds in the long term”.

“This opinion is strongest among the youngest generation, and weakest among the oldest Kiwis. More than half of Gen Z (56%) and almost half of Millennials believe that responsible investment will outperform traditional funds,” the report says.

Nonetheless, over 50 per cent of respondents said they might move to a different KiwiSaver scheme if their current provider invested in companies “not consistent with their values”.

“Two-thirds (64%) of those that do not already invest in a responsible or ethical fund are considering switching. Thirty-five percent plan to switch funds in the next 12 months and a further 30% in the next one to five years,” the RIAA study says.

The survey also found attitudinal differences between generations – loosely labeled (in descending age order) as baby-boomer, Gen X, millennial and Gen Z – across most issues canvassed.

For example, somewhat surprisingly, younger investors (Gen Z) were less interested in receiving information about the non-financial aspects of their investments compared to the broader population.

“Only 56% of Gen Z expect to be informed about the companies their funds invest in, compared to the population average of 63%,” the report says. “Similarly, only 56% of Gen Z seek information about real-world outcomes of their investments, compared to 61% of the population. At the same time, Gen Z is the cohort that is most likely to believe that their investment decisions can influence social health and wellbeing.”

Similarly, both boomers and Gen Z-era individuals were the most skeptical about the positive impact of their investments on climate change compared to the middle-age range respondents.

“Baby Boomers are the least likely to believe that their investments can influence climate change at 37%, followed closely by Gen Z at 39%,” the RIAA study says. “Millennials are the most likely to recognise the link between investment and climate change at 50%, followed by Gen X at 43%.”

The survey of just over 1,000 New Zealanders also found while the majority favoured ‘ethical’ investment strategies, many were also concerned about the lack of quality information on the approach and the risk of ‘greenwashing’.

Simon O’Connor, CEO chief, said in a statement: “This survey shows that half the population are apprehensive that fund providers are greenwashing and making misleading claims, and are demanding that their providers can back up their claims.

“Consumers have awoken to the opportunity to invest in line with their values but are also much more attuned to cut through the spin to find products that deliver on the most important issues for them.”

Just over half of those surveyed also expect financial advisers to have some understanding of responsible investment strategies.

The latest RIAA NZ survey is the fifth in a series dating back to 2016.