The NZ arms of many Australian-owned fund management groups are steering an independent line on socially responsible investing (SRI), head of the sector’s peak Australasian body says.

Simon O’Connor, Responsible Investment of Australasia (RIAA) chief executive, said a number of Australian-parented NZ fund managers – including BT/Westpac, AMP, ANZ, BNZ and Mercer – have kept local control of environmental, social and governance (ESG) policies.

“Notably, those (NZ) domestic organisations are formulating their own ESG approach rather than using one handed down from their Australian owners,” O’Connor said. “It’s pleasing to see them doing it on a NZ basis.”

Fund managers must have a clearly-defined environment, social and governance (ESG) policy to attract institutional investors, according to Mint Asset Management chief, Rebecca Thomas.

Thomas said wholesale investors increasingly see comprehensive ESG policies as a must-have fund management item rather than simply a specialised portfolio ‘ethical’ option.

“Globally, fund manager responsible investment policies are now viewed as a hygiene factor by institutional investors,” she said, to be tested against international ESG benchmarks.

There's been a dramatic increase in ethical investments since the public outcry over KiwiSaver investments send fund managers scrambling to dump millions of dollars in weapons and tobacco companies.

Investment in ethical funds that exclude such companies jumped 2500 percent to $42.7 billion by the end of 2016, up from $1.6bn in 2015, a Responsible Investment Association of Australasia (RIAA) report showed.

KiwiSaver provider Kiwi Wealth says it will cut out investments in weapons, tobacco and whaling companies as part of a new responsible investment strategy as well as companies with a poor track record in environmental, social and governance areas.

The move comes a year after Radio NZ and the Herald highlighted controversial investments made by KiwiSaver providers.