THERE is a worldwide trend for investors wanting to make a positive contribution to the world by investing in companies that are socially and environmentally responsible.
If you are passionate about social or environmental policies, then you will no doubt wish to ensure that the companies you invest in are going
about their business in a manner that is consistent with your views.
Traditionally, fund managers have had full discretion to invest funds based on expected financial return.
However, investors are now demanding more information about where their money goes and whether they are unwittingly supporting the expansion of companies that are harming society or the environment.
Responsible investing describes an investment strategy which seeks to maximise both financial return and social good.
In the early days of responsible investing, funds typically used a "negative screen" for selecting investments, which means they avoided such things as tobacco, alcohol, gambling and armaments.
Later came a "positive screen" which means they sought out companies whose products are good for society or the environment, such as windfarms or water purification).
More recently, fund managers are using a range of environmental, social and governance (ESG) criteria.
As responsible investing grows in momentum, fund managers are using the voting power they have as shareholders to directly influence the ESG policies of companies - an approach sometimes referred to as "shareholder activism".
The evidence clearly shows that companies with sound ESG policies also produce excellent financial returns, so that responsible investors can indeed be rewarded for their contribution.
For more information, contact your adviser or the Responsible Investment Association of Australasia: www.responsibleinvestment.org
Liz Koh is a financial adviser, based in Paraparaumu. Her disclosure statement can be obtained free of charge by calling 0800 273 847. Author of Your Money Personality; Unlock the Secret to a Rich and Happy Life. She can be contacted on email: liz.koh@moneymax.co.nz or view: www.moneymax.co.nz
