Markets with Madison: ESG edition - does going woke mean going broke?

Three letters E, S and G now rule a large portion of investment decisions, with funds flowing to companies that meet environmental, social and governance standards - but do stronger-held values equal stronger returns?

Ethical investment firm Pathfinder’s chief executive John Berry says it does.

“Ultimately, I’m still a capitalist, I want to make as much money as I can for investors, I just want to do it in a way that’s positive for the planet.”

The market regulator is keeping a close eye on such claims and wants fund managers to substantiate them.

“If somebody is prepared to give up returns, or if they are prepared to pay more for a product on the basis that they are that they feel like their values are being well served, that better be true,” Financial Markets Authority executive director of regulatory response Paul Gregory told Markets with Madison.

The FMA had not taken any action against investment managers over ESG because a recent investigation found no misleading claims, he said.

“But what we did find is a lot of vagueness, a lot of imprecision, a lot of use of terminology that wasn’t necessarily clear.”

Funds had since made improvements to their disclosure statements, “which is good”, he said. “The clearer it can be, the better.”

Get investment analysis and insights from the experts on Markets with Madison every Monday and Friday on the NZ Herald.

Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.