Investor’s approach to assuring ethical and sustainable work practices

Investors need to know and understand about responsible investments, and the impact their investment decisions can have on ethical and sustainable work practices.

Investors can play a key role in the delivery of fair treatment of workers by taking positive actions to make sure their investment strategies value and consider ethical and sustainable work practices.

Demand and support for ethical and sustainable work practices, including fair treatment of workers, is increasing. Unfair treatment of workers can negatively impact on a company’s profitability and long-term sustainability by:

  • damaging brand reputation, goodwill, and loyalty
  • affecting the ability to retain or attract quality staff
  • affecting the productivity and wellbeing of workers
  • threatening the viability of a business. 

What are ethical and sustainable work practices?

Read more about what we mean by ethical and sustainable work practices: 

What are ethical and sustainable work practices

Your role as an investor

As an investor, or an agent for an investor, such as a financial advisor, you can make sure that the companies you are investing in have ethical and sustainable approaches in relation to the fair treatment of their workers. Such approaches are both socially conscious and contribute to the long-term sustainability of these companies and their workforce. This concern should extend beyond the company itself to include the supply chains that supply its goods or the franchisees that provide its services.

Organisations with responsible work practices are more likely to last – so your investment is more likely to last too. These organisations are more likely to stay on the right side of the law and less likely to be fined or penalised. This means they will have more time, money and resources to grow the organisation. Investing in an organisation that does the right thing could also mean you receive more dividends.

The GNDI Global Director Survey Report 2018 found that:

“Ethical behaviour, health and safety, and employee engagement were the three most relevant environmental and social issues, and risks for directors. Unethical behaviour ultimately damages organisations and their personnel. Lost customers, employees and sales, and the loss of a hard-won good reputation can take years to rebuild. Some organisations may never recover. Conversely, running a company with consistent integrity and high ethical values is simply good business.” 

GNDI Global Director Survey Report 2018 – Institute of Directors New Zealand (external link)

Take action as an investor

Make sure your investments (new or existing) are with organisations that treat workers fairly, both directly and through their business networks and supply chains. If you manage your own investments, you could research work practices yourself. Ask not only about the organisation you are investing in, but also about their supply chains and others in their business network, for example, franchisees. If you invest through a fund, you could pick a fund that invests only in organisations with ethical and sustainable work practices.

Start by making enquiries of the organisation, including checking their annual report and their website. Below, we’ve suggested some questions you might like to think about.

You can ask: Do you have a code of conduct or policy on your human and labour rights? Does it include compliance with employment standards? 

The answer should tell you how the code or policy is implemented. The organisation should send the most recent example of their document.

You can ask:  Do you report on social sustainability (including fair treatment of workers)? 

The answer should tell you how they report and monitor, such as what areas they cover, and how regularly. 

You can ask:  Do you commit to report any situations where you, or your supply chain, have breached employment standards?  

In their answer, the organisation should include the most recent . It could be a separate corporate social responsibility or sustainability report, or a section in their annual report.

You could ask: Do you have a supply chain map that shows where the greatest risk of poor treatment of workers is, and how you will reduce that risk?

The answer should tell you what risks they have identified by mapping the supply chain or developing a risk table. 

Supply chain mapping

Risk factors to manage [PDF, 225 KB]

You could ask: Do you have an ‘employee voice’ tool that gives workers, customers or suppliers a way to speak up about unethical or illegal behaviour (whistleblowing)? 

The answer should tell you how workers, suppliers and customers give feedback on how they are treated. The organisation should also tell you how they remediate issues.

You could ask: Do you hold a certification or accreditation that has robust employment rights criteria and is externally audited? Do you require your suppliers to hold one?   

The answer should tell you:

  • what their policy is and if they hold any accreditation or certification
  • if the accreditation requires the organisation to do due diligence on their suppliers and contractors
  • if the certification involves third-party audits and confidential employee interviews.

What you can do if you are a director

If you are a director of a company, you may also be interested in our information for directors.

Director’s approach to assuring ethical and sustainable work practices

Responsible investment

'Responsible investment' is about being ethical and sustainable when investing. It means considering not just a company’s financial performance but also their ESG performance.

E — environmental (planet)

S — social (people)

G — governance (prosperity)

For example, how do they treat their workers, suppliers, and other stakeholders? Do they pay fair wages, support inclusion and diversity? Do they ensure that their supply chain is ethical and sustainable?

Investing in organisations with ethical and sustainable work practices indirectly supports good practices. Avoiding organisations with poor work practices means not supporting unsafe or unfair conditions.

The six principles for responsible investment

The United Nations’ Six Principles for Responsible Investment demonstrate how you can consider responsible investing issues when investing. For example, the principles state that investors will actively find out about ESG issues when making decisions. Find out more, including the actions you can take::

UN Principles for Responsible Investment (external link)

Responsible Investment Survey

In 2020, the Responsible Investment Association Australasia (RIAA) and Mindful Money commissioned a survey about responsible investment, and found that more than three-quarters of New Zealanders with KiwiSaver or other investments believe that ethical or responsible investments are more profitable in the long term. The study also showed that:

  • New Zealanders want to avoid investing in companies that do not reflect their values.
  • Human rights violations and labour rights abuses top their list of concerns, followed closely by harm to the environment.
  • There is strong growth in the demand for socially responsible investments.
  • Of those New Zealanders who do not consider that they invest ethically or responsibly at present, most intend to do so in the next year.

Responsible Investment: New Zealand Survey 2020 – Mindful Money (external link)

Responsible Investment Association Australasia (external link)

Choosing KiwiSaver and investment funds that respect workers

There are a growing number of KiwiSaver and investment funds with policies that respect human rights in supply chains and ensure high standards of practice in the companies they invest in. They monitor their company investments for any evidence of modern slavery, and take action to divest or engage with the company where there are violations.

You can take affimative action when choosing your KiwiSaver investment partner or other investment funds, and not invest in funds that have weak or non-existent social and ethical investment policies. Choose funds that can make a positive contribution to fair work and human rights protection.

More information on ethical investment

Sorted

Sorted has a series of saving and investing guides.

Saving and investing – Sorted (external link)

Mindful Money

Mindful Money is a free service that shows human rights issues in Kiwisaver and investment funds, and has a fund finder to identify funds with high ethical standards. They also have the following resources.

What is responsible investment? – Mindful Money (external link)

Does ethical investment earn good financial returns? – Mindful Money (external link)

Responsible Investment Association of Australasia

The Responsible Investment Association of Australasia (RIAA) is an industry member association that certifies responsible investment funds, and supports its members on ESG issues.

Responsible Investment Association of Australasia (external link)

Ethical investing

The Financial Market Authority (FMA) has information on what to look at when considering ethical investments.

Ethical investing – Financial Market Authority (external link)

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Page last revised: 12 October 2022

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