Management practices in Australasian ethical investment products: a role for regulation?

Abstract

This paper adds to the literatures on socially responsible investment (SRI), investment management, regulation of fi nancial services and social accounting by providing a comprehensive survey of investment methods used in SRI products and regulated social reporting in fi nancial services. Australian and New Zealand regulations require issuers of selfdeclarative SRI products to provide details on methods used in portfolio construction. Regulators' objectives to standardize the reporting of portfolio construction and thus improve its comparability were identifi ed by examination of parliamentary debates and other public reports. Portfolio construction styles of 86 SRI products managed by 63 fi nancial institutions in Australia and New Zealand were chosen for analysis. Statistical analysis was conducted to identify associations between styles, construction methods and assessment techniques over a four-year period: [2004][2005][2006][2007]. These aspects were further examined in 18 case studies. Over the period, diversity and intensity of construction methods had increased both within and between investment managers. The non-standard nature of management consultation used in SRI products, marketing needs to distinguish rather than standardize investment methods and the types of information thought relevant to clients did not reconcile easily with the types of information required by regulation. The more recent products in the sample tended to reference market indexes in portfolio construction, separate social considerations from fi nancial considerations and delegate qualitative assessments of invested companies. Consumer policy implications arise from questions bearing on the integrity of information attached to investment products and the effective monitoring of delegated investment processes.

Socially Responsible Investment: Labour Standards and Environmental, Social and Ethical Disclosures within the SRI Industry

“…This study has drawn attention to a disclosure gap that existed between the requirements of the Guidelines and their application. The existence of a disclosure gap revealed in this study is consistent with the findings of Haigh and Guthrie (2008 and 2009), which showed a significant gap between regulators’ objectives and fund management practices. From the findings of this study, it is clear that the issuers of PDSs need further assistance if the disclosure is to achieve the objectives of transparency, accuracy, comprehensibility and comparability as espoused by ASIC.…”

“…Prior research in this area has ascertained that since the Guidelines were introduced, some disclosures have been of poorer or reduced quality (Haigh and Guthrie 2009), the processes followed in portfolio construction are fluid and vary considerably (Haigh and Guthrie 2008), and there is limited compliance with the Guidelines (Banasik and Kloot 2007). Furthermore, the format and content of relevant information in the PDS has varied as much after the legislation as it did before the legislation was enacted (Haigh 2006a).…”

Can sustainable investments outperform traditional benchmarks? Evidence from global stock markets

“…Nonetheless, the growth has occurred at a rate that does not allow the achievement of SDGs until 2030. Thus, stock markets (SSE, 2018), mutual funds (Koellner, Weber, Fenchel, & Scholz, 2005), banks (Mengze & Wei, 2015;Schrader, 2006), companies (Yadav, Han, & Rho, 2015), regulators (Haigh & Guthrie, 2010) and other agents interested in sustainable investing are engaging in and promoting initiatives to accelerate the growth of these investments. One of the main constraints to the acceleration of this rate is the lack of information about the performance of sustainable investments, especially in stock markets (UNCTAD, 2014).…”

Climate Change and Global Policy Regimes

“…Those that pertain to a fiduciary investor deserve consideration here. Pension funds in some European countries, Australia and New Zealand have been required to disclose their use of ecological considerations in the investment process (an administrative measure) (see, Haigh and Guthrie 2010). A fiscal measure would be a fiduciary's decision to allocate funds towards companies enjoying concessional tax status for green-certificated investments, such as has been made available in the Netherlands.…”