The demand for ethical investments in KiwiSaver is becoming increasingly popular, with 49% of Kiwi’s looking for a responsibly invested KiwiSaver fund. New Zealanders are clearly making a shift towards ethical investments of their KiwiSaver accounts, so let's find out how Fisher Funds is achieving ethical status.
What even is ethical investing? Ethical investing is based on ethical and moral principles. Everyone will have their own personal values to define what ethical is for them and that is ok. For most, ethical investing is steering clear of sin stocks, with commonly avoided investments in fossil fuels, tobacco and gamblings.
Each KiwiSaver Provider does their own research and makes their own decisions on what is and what is not ethical, so let's take a closer look into Fisher funds and what they class as Ethical investing.
What approach do Fisher Funds take?
Fisher Funds is committed to investing money responsibly. For Fisher Funds, responsible investing is not just the right thing to do, but that it is just common sense.
When Fisher Funds choose investments, they look for companies who invest in their own people by treating their communities well, with environmentally friendly values.
Fisher Funds takes a three-pronged approach towards responsible investing, these are:
Avoid the bad
Fisher Funds will not invest in companies that produce goods or services that can not be used responsibly, that cause widespread harm, or that demonstrate a lack of integrity.
That means they do not invest in:
- Oil and gas producers or coal miners.
- Tobacco or tobacco-related product growers or producers.
- Weapons manufacturers including; firms that produce landmines, chemical and nuclear weapons and assault rifles.
- Casinos or other gambling firms including companies that produce specialised hardware and software used for gambling.
Embrace the Good
According to Fisher Funds, they are all about embracing the good!
Understanding how a company works with its stakeholders, how it treats the environment and how it manages its governance responsibilities are all key elements in Fisher Funds' in-depth company research process. They supplement their research with a specialist responsible investment research firm. This is a great tool that means that Fisher Funds can be confident and proud in their investment decisions
To promote positive change, Fisher Funds use their relationship with the companies they invest in to educate and encourage responsible and ethical decision making that represents the views of Fisher Funds clients.
What does that mean for you? If you invest with Fisher Funds, you can be sure that they are using their relationships to share your ethical views with all 90 companies who they invest in.
As we’ve mentioned above, responsible investing is not just the right thing to do but also the wise thing. As Fisher Funds is an active manager, this means that they continuously monitor their investors to ensure that all investments align with your ethical values.
How do they decide who to avoid?
The level of detail that Fisher Funds looks into for each investment potential gives clients the peace of mind that they are doing all they can to ensure investments align with their strict ethical values. In fact, Fisher Funds exclusion list is over 10 times longer than their inclusion list. They have excluded over 1,000 companies, however have only approved a mere 90. As Fisher Funds number one rule, they Avoid the Bad.
Every quarter, Fisher Funds Environmental, Social, and Corporate Governance (ESG) committee review and update their exclusion list, demonstrating their desire to continuously meet their ethical values.
How do Fisher Funds choose which companies to invest in?
The below video explains how Fisher Funds achieves success in ethical companies.
As you saw in the Fisher Funds video, there are 109,000 companies listed on the stock market globally, and Fisher Funds has handpicked 90 of those.
How do Fisher Funds make investors money while still being ethical?
Fisher Funds has certain Investment principles that guide their decision-making process.
Beat the Market
Fisher Funds believes that it is possible to beat the market by picking winners and avoiding losers. Their experience confirms that outperformance is possible, but not at all times. Fisher Funds investment team focuses on active management, by selecting investments they believe will beat the market. They also look for a company that has intelligent fanatics, which this quality has been described as having the ability to build one of the greatest businesses.
Predict and Understand factors
Fisher Funds know that the markets and prices are influenced by many factors. They focus on the factors that they can predict and understand, for example the quality and competitive advantage of a particular company, rather than unpredictable factors such as exchange rates and central bank policies. Fisher Funds is looking for a long runway of growth, where the company can prosper regardless of the economic backdrop that it sits within.
Investors not Speculators
Fisher Funds say that they are investors and not speculators. If they cannot make an informed judgement as to the value of an investment, they will wait until they can. They understand the difference between price and value, and they know the market will get it wrong from time to time. Fisher Funds rely on their own assessment of value, rather than the markets. Fisher Funds looks for a company who has pricing power, where they have the ability to lift their prices on goods and services by more or significantly more than inflation.
Spread their bets
Fisher Funds believe in spreading their bets rather than risking their clients’ money on a handful of bets that they are not comfortable with that could potentially cause a negative effect on their clients investment. In each of Fisher Funds portfolios, they diversify across businesses, sectors and geographies so that no one investment can have an undue influence on their overall returns.
Long Term Investors
Fisher Funds pride themselves on being long term investors, and make their investment decisions accordingly. They are not looking for the stock of the month, but instead like to find the stock of the decade. Many of Fisher Funds clients have an investment time horizon of many decades. Fisher Funds is also looking for companies who have a wide economic moat, where other companies will find it very difficult to compete with.
Fisher Funds want their clients to know what to expect. They have summarised their stock-picking framework, along with their broad investment approach on their website and encourage all potential investors to visit. Fisher Funds also keep their clients updated in their investing newsroom. They state that no one likes a surprise when it comes to investing.
Research and Decisions
When making decisions on who to invest in, they consider the evidence of change in each of the companies activities, behaviour or governance to assess the sustainability as an investment. Fisher Funds evaluate the corporate conduct of potential investments, by looking at their behaviour from an ESG perspective. They research each individual company and the insights gained are incorporated into the decision making process.
What are the Principles of Responsible Investing?
Fisher Funds are part of a signatory to the Principles of Responsible Investing. There are six principles that they agree to when becoming a signatory. The principles are based around environmental, social and corporate governance (ESG) issues that verify ethical values are met.
Principles of Responsible Investing:
What does the Fisher Fund do to achieve this?
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.
Their ESG committee reviews all investments and exclusion list, on a quarterly basis ensuring that they have incorporated the ESG issues in their decision making for their investments.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.
They educate and encourage companies they invest in to continue and improve ethical practice.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
They rigorously vet each company to ensure their policies align with Fisher Funds ethical values.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
They are active in engaging with companies they invest with to promote and educate them on responsible ethical decision making.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
They have a designated ESG committee to continuously improve and monitor the effectiveness and implementation of ethical principles.
Principle 6: We will each report on our activities and progress towards implementing the Principles.
They show their progress of implementing responsible ethical principles in their annual report.
What Fisher Funds has done to contribute to society
Bruce McLachlan put out a message to clients of theirs, that they have had a successful year and due to that they have been in the fortunate position to be able to give back to New Zealand and support the people who really need it.
Bruce McLachlan goes on to say that due to the mental health crisis New Zealand is facing right now and with the past two years being disrupted with Covid-19, that New Zealanders are needing help more than ever before.
Fisher Funds decided to make a one off donation of $500,000 to Youthline and I Am Hope, both charities that support New Zealanders every day with their mental health issues.
This donation helps Youthline by being able to support 37,000 extra contacts from young people in need through their 24/7 Helpline service, expand their Helpline Webchat services so that it is available from 10am to 10pm every day, and provide 1,154 free one-hour counselling sessions to young people across New Zealand in need of longer-term support.
For I Am Hope it will allow them to double the number of youth ambassadors they have running their in-school programme from two to four, meaning they can reach thousands more young people across the country over the next year.
Is your KiwiSaver fund investing ethically?
A KiwiSaver provider can simply say that they are investing ethically or responsibly, but that could mean differently to different people. We engage regularly with various providers and investment managers to thoroughly understand their investment policies and how they are put to use when selecting companies to invest in.
Choosing a KiwiSaver fund that invests ethically may be important for you, and we will take that into consideration in our investment selection process. In addition to ethical considerations, ensuring that the funds we recommend to you are the most suitable for your situation and goals is important. To optimise your investments in KiwiSaver, you need to make sure that your KiwiSaver fund is right for you. Submit our KiwiSaver HealthCheck to find out more.