Ethical investing series: Part 3 of 3
This is the final part of our series on Ethical Investing, where we will discuss the controversial areas in which some KiwiSaver funds are invested. BetterSaver can help you ensure your fund matches your values.
Your KiwiSaver investment is about more than returns. Your money is active, supporting the various companies that your portfolio is invested in. Is your money affecting the world in a way that lines up with your values? Or could you be investing in things that go against your ethics?
In our previous two articles in this series, we covered topics where your KiwiSaver might be invested, including alcohol, tobacco, gambling, adult entertainment, animal testing, and nuclear power. In our third and final part, we are talking about weapons.
We present this information so you can make an informed decision about where you sit on the issue of investing in weapons manufacturing and do not advocate for or against it.
Are there weapons in your KiwiSaver fund?
As of last September, $190 million of KiwiSaver funds were invested in companies involved in the manufacture of weapons.
What this means exactly needs a little explaining. Not all weapons are created equal. Generally, weapons are split into three categories: nuclear, cluster munitions and anti-personnel mines, and ‘conventional’ weapons of war.
In 2020, the government chose six new default KiwiSaver providers and banned them from investing in companies that make nuclear weapons, cluster bombs, and anti-personnel mines. So if you are in a default fund, your money won’t be going towards the manufacturing of these specific weapons, though it may be invested in other weapons.
NZ has a “no nukes” policy - except in our KiwiSaver investments?
Doesn’t really make sense, but it’s true. In September 2019, $100 million of KiwiSaver funds were invested in nuclear weapons. The media brought the issue into focus with the threats of Russian President Vladimir Putin against Ukraine, highlighting the public outcry over investing in the manufacture of nuclear weapons. Most Kiwis are not ok with it.
KiwiSaver providers responded by disinvesting from these companies, and the most recent estimates put nuclear weapons investment at just under $5 million.
While not eradicated, the amount invested has significantly reduced. It seems providers responded to what the general public demanded, though it is still their choice to invest in nuclear weapons or not - just as it is your choice to choose a KiwiSaver provider who invests in a way that aligns with your values.
Cluster munitions and anti-personnel mines
Cluster munitions, or cluster bombs, are weapons dropped from aircraft that contain multiple smaller submunitions. Some of these munitions may not explode on impact, becoming a land mine and creating a danger for civilians.
Anti-personnel mines are landmines designed for use against humans (as opposed to vehicles). They detonate when stepped on and so pose a grave danger to people long after a war is over and make areas of land unusable for crops or anything else.
According to the Ministry of Foreign Affairs and Trade, “New Zealand regards the very existence of anti-personnel landmines and cluster munitions as inherently unacceptable.” We are party to international treaties that prohibit their use.
So it came as a shock back in 2015 when Stuff revealed that some KiwiSaver funds were invested in companies involved in the supply of cluster munitions and/or anti-personnel mines. Much like the response to the outcry over nuclear weapons, many providers took action to exclude these companies.
KiwiSaver providers may still invest in these companies if they choose.
Conventional weapons of war
Conventional weapons include things like firearms, missiles, and ammunition.
The horror of war is all too real with Russia’s invasion of Ukraine filling our news feeds. The loss of life and suffering caused by weapons may understandably make us uneasy about investment in their manufacture and distribution. On the other hand, countries need the ability to protect their populations and deter aggression from invaders.
This can create a dilemma for KiwiSaver investors. For instance, Lockheed Martin is the world’s biggest weapons manufacturer. Twenty-three KiwiSaver funds hold investments in the company. They manufacture the Javelin missiles used by Ukraine to fight the Russian tanks. Their weapons have also allegedly been sold to governments implicated in human rights violations.
Weapons producers don’t discriminate against who they sell to. They may support a cause you agree with, or they may go to repressive regimes. Just last year, ANZ came under fire for investing KiwiSaver funds in supplying weapons to the Saudi military, even when Saudi Arabia was involved in the Yemen war. The Yemen war was a humanitarian disaster that killed over 130,000 people and left the country on the brink of famine. Most Kiwis are not on board with supporting this and ANZ pledged to review their funds.
And what about weapons not used for war? Military and police use weapons for protecting society and in humanitarian efforts. Civilians use guns for hunting and target shooting.
Over 80% of Kiwis don’t want their KiwiSaver invested in weapons. Only you can decide where your personal values sit regarding investment in weapons.
How do I know where my KiwiSaver fund is invested?
You can start by asking your current KiwiSaver provider where they are invested. You can’t rely on whether they market themselves as an ‘ethical’ fund or not. Many KiwiSaver funds claim to invest ethically, but the Financial Markets Authority has recently called out KiwiSaver providers for failing to provide evidence.
Or, you can just ask us. The BetterSaver team uses Morningstar data to track each KiwiSaver fund’s exposure to ethical issues. We update our data quarterly to reflect any changes in the market. When you take our fund finder quiz, you can set your own expectations about investment in this and other ethical sectors, and we will tailor our KiwiSaver fund recommendation to your choices.
We recognise that you have a choice whether or not you want to support companies that manufacture and distribute weapons, and we do not judge. Our algorithm weighs your ethical preferences alongside returns, volatility, and fees to make a personalised KiwiSaver fund recommendation.
The most important thing is that your KiwiSaver fund aligns with your goals, timeline, and risk tolerance in addition to your values. This is so that you can set yourself up for a solid financial future while supporting areas that match your ethics.
Take our fund finder quiz today and we’ll match you to a better KiwiSaver fund in under five minutes.