$100 Billion Of KiwiSaver Funds Use An Ethical Approach

New analysis from the charity, Mindful Money, shows good news about Kiwis investing ethically. There is rising demand for ethical investment, more Kiwis aware of the companies in their KiwiSaver fund, and a sharp decline in unethical investment. Ethical investment has progressed from a niche to become the dominant approach to managing investments.

As KiwiSaver hits $111 billion in funds under management, the FMA has estimated that 90% of KiwiSaver is now managed with some form of ethical investing approach, usually through Environmental, Social and Governance (ESG) analysis. This means that $100 billion of KiwiSaver funds are now managed with some form of ethical management.

Barry Coates, co-CEO of the charity Mindful Money explained, “Members of the public understand that their investments have consequences for the issues they care about - climate change, a healthy environment and social well-being. Mindful Money helps them find out where their money goes. Knowledge is power, and Kiwi investors are using it.”

Ethical investing is now good practice

This growth in ethical investing is primarily driven by two key factors. Firstly, the growth in consumer demand, as more investors become aware that their investments have consequences for the climate, the environment and social well-being. And secondly, the understanding by investment providers that it makes sense to reduce the growing financial risks of poor environment, social or governance practices.

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Coates emphasised the power of collective action: "This remarkable progress demonstrates the undeniable impact of people power. As more New Zealanders demand ethical investment options, we're witnessing a fundamental shift in the market. It's clear that informed and engaged citizens have the ability to reshape the financial landscape, driving positive change that aligns with our shared values and aspirations for a better world."

Unethical investment is on a downward trend

Mindful Money has data on the trend in KiwiSaver and managed funds investment over the past six years and has been tracking progress. There have been significant changes in the proportion of investment in unethical issues. These include:

• 74% fall in tobacco products
• 33% fall in alcohol
• 20% fall in gambling
• 69% fall in pornography and adult entertainment
• 31% fall in weapons
• 29% fall in animal cruelty
• 16% fall in environmental damage

Barry Coates expressed optimism about these developments: "We're seeing promising signs that the investment sector is starting to shift gears. More funds are moving towards ethical options than ever before, reflecting the growing demand from Kiwi investors for investments that align with their values."

“For example, KiwiSaver investments in nuclear weapons have plummeted from over $100 million in 2019 to $13 million currently, despite a huge increase in overall KiwiSaver funds. The investment providers are getting the message that their clients don’t want their money to be invested in making nuclear weapons. As a nation, we've long stood against nuclear weapons, and now our investments are starting to reflect our values."

There is still $9.3 billion of KiwiSaver investment in harmful activities

Despite the progress, there is still a significant gap between the issues that the public wants to avoid, as shown in annual surveys, and the companies their funds actually invest in.

Barry Coates noted: “Some fund managers are too focused on short term returns. Examples are increased investment in the world’s worst oil and gas companies when oil prices rose after Russia invaded Ukraine, or investments in weapons companies that have profited from bombing in Gaza.”

He explained: “In the long term, there is evidence that ethical investment returns are at least as high or higher than conventional investing. Chasing short term returns from investing in harmful activities is unethical and against the wishes of most investors. It is also financially risky, relying on fund managers believing they can time the rises and falls of financial markets.”

“The positive trends we've observed so far give us confidence that, with continued awareness and action from investors, we can significantly reduce these figures in the coming years.”

Mindful Money’s impact report shows action to drive change

Mindful Money is celebrating a milestone. After 6 years since the charity started, over 400,000 New Zealanders have now used its tool for transparency. Mindful Money is uniquely able to show consumers where their KiwiSaver or Managed funds are invested.

While celebrating progress, Mindful Money remains committed to driving further positive change. Coates notes, "Our 2023/2024 impact report not only highlights the progress we've made but also identifies future priorities. The growth in demand for ethical investing is encouraging, but it also highlights the need for fund managers to walk the talk and avoid greenwashing.”

Barry Coates continued, “Transparency is a wonderful thing. When investors see where their money is invested, and understand that it is easy to switch funds, they are making informed choices. There has been a significant rise in people switching their investments towards funds that demonstrate that they care about ethical issues as well as good returns.”

Notes:

Survey data is from the 2024 annual survey of the New Zealand public by Mindful Money and the Responsible Investment Association of Australasia.

The FMA’s estimate of 90% of investment being managed with a form of ethical investment policy was included in FMA’s General Council, Liam Mason’s speech to the RIAA NZ Conference on 19th September 2024.

Mindful Money is today releasing its 2023/2024 impact report. It shows the contributions that Mindful Money is making to the transformation of New Zealand’s investments towards higher ethical standards and positive impact.

More members of the public are now finding out about the companies funded by their investments, categorised by the issues that annual surveys show Kiwis most want to avoid - human rights violations, environmental damage, animal cruelty, weapons, fossil fuels and social harm. Mindful Money is a charity and the information is accessible, easy to use and entirely free.

The portfolio data is compiled by Mindful Money from the fund information and portfolios that each KiwiSaver fund has filed with the Disclose register to 31st March 2024, supplemented with Mindful Money’s analysis of funds within those portfolios. The list of companies of concern has been drawn from ratings agencies and public sources, including the Norwegian Sovereign Fund, NZ Super Fund, Sustainalytics and research organisations.

The listing of companies of concern is based on definitions used in Mindful Money's methodology. These definitions may be different from the exclusions policy and definitions applied by the fund provider.

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