Some of the biggest funds in the country may consider themselves to be socially responsible investors, but an analysis shows few can actually prove it.
A report by the Responsible Investment Association of Australasia showed the amount of money invested in ethical, social or sustainable funds in New Zealand swelled by 28 percent from 2014 to 2015. The increase was driven by consumer demand.
But investing in the area is still a minefield because every fund has its own definition of what is, or is not, a responsible investment, critics say.
Responsible investments in New Zealand totalled nearly $78.7 billion in the 12 months to the end of December.
Of the 27 funds analysed by the Responsible Investment Association, eight very large investors, including the Super Fund and ACC, were signatories to the UN Principles of Responsible Investment.
A further nine asset managers, which looked after money on behalf of those bigger funds, were also signatories.
Despite this, only three of the asset managers passed the association's own responsible investment test, its chief executive Simon O'Connor said.
"We set the bar very high where anyone had to score over 80 percent to be included," he said.
The three that passed could clearly show a systematic approach to environmental, social and governance issues, Mr O'Connor said.
"We've still got some way to go before we see some of the big fund managers really demonstrating that they have embedded this practically in their day to day investments."
Consumer demand for responsible investment was growing in New Zealand, the report found, but Mr O'Connor said those trying to decipher what was - or was not - a responsible investment often had their work cut out for them.
"A lot of consumers, the feedback we've had, are that they're quite confused. There's a lot of different products in the market place and a lot of different definitions of what is an ethical investment," he said.
A single clear standard, like the Fair Trade certification, was needed to win the trust of consumers, University of Auckland business school sustainability programme leader Barry Coates said.
Auckland-based Harbour Asset Management was one of three fund managers given a pass mark by the association.
Managing director Andrew Bascand said a single certification applied to all investments was unlikely to work in practice.
"There is no gold standard and I don't think there will be a gold standard. It's an evolving approach. It's a processing of continuing to understand governance, environmental and social issues and continuing to engage with companies and encouraging them to improve year by year."
Sustainable Business Network chief executive Rachel Brown agreed.
"Trying to have a blunt instrument that tells people what ethical investment is would be very hard to pull off."
The easiest way would be to have open and transparent platforms where people could literally go and see where their investment went, she said.
The association plans to launch an app next month that will do just that, allowing consumers to filter out investments according to their ethical, social or environmental concerns.
Money Matters director Rodger Spiller, who specialises in providing responsible investment advice, said New Zealand still had a long way to go compared to other countries when it came to ethical investment.
"One of the issues is to challenge the myth that investing in this way comes at a cost to your investment returns. But you can actually make money and do good," he said.
Demand for ethical investment was now higher than ever, he said, and reports such as the association's highlighted the funds that were taking the lead in this area while encouraging others to up the ante, he said.