Ethical investing has been around for hundreds of years, says Mindful Money founder Barry Coates. Think of Quakers, who, from the late 1600s refused to invest in slave-owning companies in the United States and boycotted products made using enslaved labour.
Fast forward a few centuries and similar principles guided campaigns against both toxic chemical producers during the Vietnam War and companies supporting apartheid in South Africa.
Choosing to invest ethically has evolved rapidly since then, from a niche practice to a global movement where fund managers deploy billions, even trillions, of dollars to support climate transition and other sustainable outcomes.
In New Zealand, Asteron [now Booster] launched its first ethical fund in the 1990s with others following suit, says Coates. By the early 2000s, the mantra of ethical investors was “negative screening”, which meant excluding so-called sin stocks – tobacco, gambling, weapons and polluters – from funds. “For most consumers, and asset owners like charities, foundations and others, those are still at the core of what they care about,” he says.
By the 2010s, fund managers had realised there was a market for “positive screening” – deliberately investing in companies that did good. Some launched a single ethical fund alongside traditional ones. Purely ethical managers, such as Pathfinder Asset Management, also began emerging.
Ethical funds aimed to do good. But the PR value was significant, too.
“The classic there was when Generate KiwiSaver started putting money into a Salvation Army social housing bond,” says Coates.
“It was a competitive return for them, but they got to talk about the fact they’re helping social housing. That became a real sweet spot for them because it was a good investment.”
Fast forward to 2016, when the media revealed that five of nine default KiwiSaver providers were investing in companies linked to cluster bombs, anti-personnel mines, nuclear weapons and more. “It was a big deal,” says Coates.
As a result, the Financial Markets Authority issued guidance on how to substantiate ethical claims. Mindful Money was launched soon after, enabling consumers to make meaningful comparisons of the ethical credentials of KiwiSaver providers.
Around the same time, research from overseas universities and financial institutions filtered in showing increasingly that ethical investing wasn’t just altruism. It could be financially rewarding, Coates told the Responsible Investment Association of Australasia’s annual conference in Auckland last month. “The research showed that actually the risk-adjusted returns from ethical investing or responsible investing were in general as high, or higher, than conventional investing.”
As the decade progressed, fund managers with large sums to invest began to understand more widely that they had power to effect change, said Coates. “Money talks. If you’re a fund that controls big pots of money, you have a voice and a vote and power to replace directors or change company policy.”
Some employed “stewardship”, which meant engaging with companies to encourage better practice. This led to a new subset of ethical investing called “impact investing”, even if New Zealand was late to the party compared with some countries. Impact funds aimed to generate a positive measurable ethical effect on the companies they invested in alongside a financial return.
One of the early impact funds aimed at private investors here was Harbour Asset Management’s Sustainable Impact Fund. Instead of 300 investments, impact funds might hold shares in 30 companies, Harbour Asset Management portfolio manager Lewis Fowler told a workshop at the responsible investment conference. Although the smaller number can make change easier, it can also make the fund more volatile – and often, when Kiwis say they want ethics, the reality comes down to returns, he said.

Fund managers the world over had an epiphany in 2021-22 when activist hedge fund Engine No 1 took on ExxonMobil in the US. With support from larger funds BlackRock, Vanguard and State Street, it succeeded in getting three nominees elected to Exxon’s board. The campaign was hailed as a landmark in shareholder activism, although, says Coates, it didn’t ultimately deliver the change that was promised.
However, it sent a message to fund managers that they had muscle, and perhaps more importantly moral responsibility, to do their best to effect change.
There are caveats. In the US, attacks by right-wing politicians and organisations led major fund managers such as BlackRock to pull back from “woke capitalism” social and environmental investments.
Fund managers here are watching with bated breath, but so far, the culture wars haven’t spilled over to New Zealand and they have not faced the same pressures on their investment decisions.
As well as climate and related ethical investment questions, fund managers are also looking increasingly at their ability to influence government policy, says Coates.
“They’ve always done submissions on the latest FMA [Financial Markets Authority] policy or the latest regulation that really affects [their funds and business].”
Now, some are taking that further. The Investor Group on Climate Change, a collaboration of Australian and New Zealand fund managers, has submitted feedback on the government’s climate-related policies.
And several institutional investors last year submitted feedback on New Zealand’s second emissions reduction plan, for 2026-30 – signalling that they are not just investors but active participants in shaping a sustainable future.