A new financial year, and a move from responsible to sustainable
An update from RIAA’s CEO, Simon O’Connor
Whilst the last year has had us all battling the invisible enemy that has been COVID-19 on both personal and professional fronts, it has also been a year of immense momentum in responsible investment and sustainable finance, as you are all no doubt aware.
For RIAA, the year has seen us pursuing the opportunity at this time to drive responsible investment in a manner that aligns capital with creating sustainable outcomes, consistent with our mission. Working strongly on this mission, I see that huge progress has been made, and a clearer work plan of what remains to be done is in sight. Whilst this may be half the battle won, the biggest challenge, of actually realising that shift in capital to align with Paris and the SDGs, is the part we now must focus on across this critical decade.
New 3-year strategy
In recognition of this, the RIAA Board has just overseen and signed off on an updated strategy for RIAA for the next three years.
At its heart, this strategy pushes RIAA to take up the position of authority and standard setter focused on moving the market towards responsible investment and finance that delivers real sustainability outcomes whilst being highly valued by our community of members as the place for impactful collaboration.
We are focusing on hard-wiring these high standards of practice into the finance sector infrastructure – from ratings, to regulations, investment platforms to codes of practice. The coming years will continue to see a massive regulatory shift to set standards in ESG, and we are focused on ensuring these are set well. We articulate these high standards in our research and Certification Program, then advocate for these with policy makers, standard setters, and the industry.
Importantly in the last year, we’ve advocated for these standards in the sustainable finance roadmaps that we’ve taken a leading role in, with robust roadmaps in both NZ and Australia.
Importantly we see that at this time, RIAA’s role as a unique platform for collaboration, learning, sharing insights and jointly tackling big systemic issues is critical. Our working groups have become incredibly important forums for addressing the big sustainability issues that matter.
Against this strategy we will measure our progress, such as how we are influencing standards in policy, regulation, rating agencies and platforms; how we are achieving greater FUM flows into RIAA certified products; and how engaged our members are in our active community of responsible investors. We’ll report back on these impact measures in our Annual Report.
Australian Sustainable Finance Initiative’s next stage
Next week you will see an announcement that the Australian Sustainable Finance Initiative (ASFI), which RIAA has hosted and I have co-chaired for over two years, is moving to its next important stage – setting up as a permanent body that will be charged with overseeing the delivery of the Roadmap. New directors have been put in place, and I am stepping down from my role as co-chair to hand over to the next leaders of ASFI.
RIAA will continue to work very closely with ASFI, and already we are working with our members on the delivery of some key recommendations in relation to nature and biodiversity, First Nations peoples’ rights, disclosures and labelling to name a few.
Our members can be incredibly proud of RIAA’s role in helping to drive sustainable finance more deeply and broadly across our market, through this unlikely and incredibly ambitious collaboration. It has provided a foundation upon which the whole finance sector has agreed a path to achieve Paris and the SDGs.
The foundations are now there in the Roadmap, they are supported by the banks, insurers and investors and informed by science, academia and civil society, as they are in NZ’s Sustainable Finance Roadmap. RIAA has built significant relationships across the sector and with regulators through ASFI, and has shaped a Roadmap that is a strong and ambitious blueprint for the decade of work ahead of us. Thank you to our members for supporting us to take on such an initiative.
Global Sustainable Investment Alliance
RIAA also currently hosts the Global Sustainable Investment Alliance (GSIA), a collaboration of the largest membership based sustainable investment organisations across the world, covering the EU, North America, and Asia Pacific.
Next Monday will see the launch of the fifth edition of the biennial Global Sustainable Investment Review 2020 that maps the state of sustainable and responsible investment of major financial markets globally. You’ll see in that report a story that shows responsible investment is a major force in shaping global capital markets, but also that a significant shift is occurring globally, whereby the sector is no longer defined just by the strategies involved and commitments published, but by the short- and long-term societal and environmental impacts that investors generate from their sustainable investment approach. It is this shift that we are also keen to drive through our strategy and approach at RIAA.
Register for the global launch webinar on Monday 19 July and to receive the report and recording.
RIAA highlights and progress in FY2021
FY21 has seen strong progress in what RIAA has delivered for and with members. You’ll see more of this in RIAA’s annual report late this year, but a snapshot is included below:
– RIAA’s membership has grown 30% in the last year, reaching over 400 members, and pleasingly with strong growth across financial advisers, adviser groups and asset managers.
– Our member retention rate remains high, at over 90%, and you continue to tell us that overall satisfaction levels are high at 96%, evident in the high engagement levels with 87% of members having attended events in the last 12 months.
We’ve also strengthened our impact this year. We have been out there pushing high standards of responsible investment through our research, policy, advocacy and certification and in particular in the media:
– We’ve had over 750 media mentions in FY21, up from 430 last year.
– We’ve had strong input to shaping our policy settings, advocating on the FMA’s responsible investment guidance, default KiwiSaver requirements, APRA’s climate disclosure guidance, Your Future Your Super legislation, FASEA code updates, and even internationally such as the imminent release of the CFA Institute’s ESG disclosure guidance.
Our Certification Program continues to be a major focus for RIAA:
– We now have 209 products certified with a strong pipeline of applicants.
– These products manage over $90 billion in AUM, with a growth of 26% in the 6 months to December 2020.
– We know that of the many thousands of users of the Responsible Returns online tool, 25% of respondents to a survey are taking action on where they invest their money
– Of increasing importance is that certification is now being used to inform the ESG menus of products by some of Australia’s largest platforms – from AMP North, to Macquarie, and Panorama. We are expressly targeting platforms, dealer groups and rating agencies to use our Certification Program as the deepest ESG due diligence in the market.
– We’ve also impacted the real world – over $5 billion has been divested from tobacco due to the program’s 0% threshold, $1.7 billion has been divested from controversial weapons, and 160 stocks removed due to breaches in product thresholds.
We’ve stepped up the resourcing for our working groups in the past year, and this has lead to an incredible amount of activity, and great engagement by our members across human rights, First Nations peoples’ rights, impact investment and financial advisers, and soon to be added, our Nature Working Group. These are incredible forums, whereby expertise and insights are shared, skills and knowledge is captured and practical guides are produced.