Responsible investing trends

New Zealand investors are continuing to show more interest in products with environmental and socially responsible considerations; more and more Kiwi investors want to know where their hard-earned savings are being invested, and that the companies they are investing in operate in a manner that is consistent with their values. The same trend is being observed worldwide.

Socially responsible investing (SRI) is a general term used for an investment approach which seeks to consider a company’s broader impact on society, and/or the environment in which it operates, in additional to seeking a financial return.

Continued interest in SRI drove assets with a responsible mandate 19% higher in the first quarter of 2021, to just below $US 2 trillion. Investments into SRI have reached record highs for four consecutive quarters.

The Synergy Investment Programme is proud to have been offering responsible investing solutions since 2017 and it continues to evolve as more options become available.

Synergy Consilium SRI portfolios are comprised of funds that have no indirect investments in companies with more than an incidental proportion of revenue generated by the production, manufacturing or significant sales of the following:

• Controversial weapons (such as anti-personnel landmines, cluster munitions, chemical, or biological weapons)
• Nuclear weapons, or of components developed or significantly modified for exclusive use in nuclear weapons or providing auxiliary services related to nuclear weapons
• Civilian firearms
• Tobacco

While the above represent minimum exclusions, most funds within our SRI portfolios also take into account additional factors when considering their investments. Where applicable, these additional factors may include some, or all, of the following:

• Human rights violations
• Child labour
• Alcohol
• Gambling
• Recreational cannabis
• Pornography
• Factory farming activities or other animal welfare violations
• Nuclear power

Recent changes to Consilium Synergy PIE portfolios

As the responsible investing space continues to evolve, some funds occasionally make changes to better meet their investors’ needs.

During the last quarter, one such change was the global fixed interest fund in the PIE portfolios. As of 21 June 2021, the Hedged Global Fixed Interest Index Fund (managed by AMP Capital) changed its target benchmark to modify its mandate, placing greater emphasis towards SRI. The following PIE portfolios hold this fund:

• Synergy Consilium PIE 30/70
• Synergy Consilium PIE 50/50
• Synergy Consilium PIE 80/20

The benchmark for this fund changed from the Bloomberg Barclays Global Aggregate Index to the Bloomberg Barclays MSCI Global Aggregate SRI Select ex-Fossil Fuels Index, and the fund’s name changed to Ethical Leaders Hedged Global Fixed Interest Index Fund.

The Bloomberg Barclays MSCI Global Aggregate SRI Select ex Fossil Fuels Index is designed to integrate environmental, social and governance (ESG) considerations into the investment process by targeting companies with high ESG ratings and excluding companies whose products have negative social or environmental impacts.

The MSCI SRI Index excludes issuers with substantial revenue derived from sources such as alcohol, tobacco, controversial military weapons, nuclear power and genetically modified organisms (GMOs).

The impact of this change on the fund will be minimal. It has a very similar risk profile as it always had (namely, a very well-diversified portfolio of short to long term investment grade bonds), remains in the efficient PIE structure best suited to New Zealand investors and still charges the same low fund management fee.