ETHICAL EVOLUTION

How fund managers caught on to leveraging their pots of money for good.

- How fund managers caught on to leveraging their pots of money for good.

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.