Ethics & Investing: Who is Your Money Really Working for?

April 07, 2021

April 07, 2021

You recycle, walk or bike when possible and try to avoid plastic. You wouldn’t dream of buying a product tested on animals much less give your money to help produce weapons used in wars. But have you considered what your KiwiSaver dollars might be supporting?

Ethical investing can be a bit of a minefield. Even companies who claim to maintain certain standards when it comes to ethical or sustainable funds can’t always guarantee those standards are met.

While many KiwiSaver providers do their best to avoid directly supporting funds that could be seen as unethical, they don’t control what suppliers or business partners of these companies might be doing.

How can you be sure of where your KiwiSaver dollars are invested? What sort of projects might you inadvertently be helping?

Current affairs

A few weeks ago, ANZ was called out for investing KiwiSaver dollars in the Saudi military, even after the Saudis were involved in the Yemen War. Thousands of Kiwis were astonished to find out that their investments were supporting a humanitarian disaster.

In our article about this (“Your KiwiSaver and Weapons of War: What You Need to Know”) we discussed how this isn’t a new phenomenon. An analysis by Mindful Money showed that as of September 30, 2020, $210 million of KiwiSaver funds were invested in weapons production. Of this, $52 million is invested in nuclear weapons. Further, back in 2016, the NZ Herald announced that $152 million of KiwiSaver funds was invested in arms manufacturers and big tobacco - involving the investments of more than 2 million New Zealanders.

And back in November, we talked about funds that invest in things like GMOs, animal testing, human rights abuses and other unsavoury areas that a lot of Kiwis would not be happy to knowingly support.

Unfortunately, this continues to happen, though things seem to be improving. As the barriers to ethical investing reduce and more people see it as a favourable option, more funds are striving to meet ethical standards.

What does ethical investing actually mean?

When we talk about ethics, the term is pretty broad. It means different things to different people.

Moneyhub puts it this way:

“Ethical investing is ‘responsible investing’ combined with a more values-based approach. This means wanting companies to ‘do the right thing’ and behave ethically not only because it may generate higher investment returns but also because it is better for our planet and people.”

A definition dependent on subjective terms like ‘responsible’ and ‘values-based’ means we can’t simply label investment funds as ‘ethical’ or ‘unethical.’ We have to dig a little deeper and apply our own personal values to determine if we are comfortable supporting it. But, in general, Kiwis are highly concerned when it comes to ethical matters, with 93% saying they would switch funds based on their ethics.

Can KiwiSaver ever have a guarantee of ethics?

Ethics are an incredibly personal matter. Not everyone upholds the same beliefs. What might be totally unacceptable to one person might not bother another.

Demands for transparency from providers have increased in recent years. People want to be able to make informed decisions - and everyone should have that right. The more people who speak up, the more providers will have to pay strict attention.

Fortunately, right now it is easier than ever to make sure your KiwiSaver is invested ethically. A few years ago, BetterSaver’s founder Joe Taylor launched our ethical analysis platform. It ruffled a few feathers when not a single provider received a grade over C+. But Joe stuck to his commitment to reveal where Kiwi dollars are really being invested.

Today, BetterSaver’s ethical investor platform is available to you through our fund finder quiz. Our quiz will identify where you stand on certain issues so you can be sure to choose a fund that aligns with your values.

Will investing ethically affect my returns?

It’s understandable that some may fear that changing funds to more sustainable or ethically responsible funds might affect your returns. But a 2020 analysis done by Morningstar found that when compared with traditional funds, sustainable and ethical funds matched or even beat returns.

It’s critical to make sure you are with a provider and fund that will enable you to reach your goals within the timeline you have. Your ethics are just one of the factors to consider when selecting a fund.

Our commitment to ethics

At BetterSaver, we firmly believe every individual has the right to choose where their money is invested.

That’s why we analyse KiwiSaver funds, digging deep into the data to see where the money invested actually goes. We use our fund finder quiz to find out more about your values to make sure you choose a fund invested in areas that you are comfortable supporting.

We are committed to making sure you not only get into a fund that matches your ethics but will allow you to realise your goals. Whether buying a first home or saving for retirement, we can help make sure you get there - without supporting any causes you don’t agree with.

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