This Friday is Earth Day. Every April 22nd since 1970, people around the world celebrate our planet and take action to protect it. This year’s Earth Day theme is “Invest in our Planet.”
It’s a reasonable time to ask the question - is your KiwiSaver fund investing in the planet?
Unfortunately, the answer is not as clear-cut as you might think.
Are KiwiSaver providers guilty of greenwashing?
Greenwashing is the practice of companies appearing to be more environmentally friendly than they actually are. Over 80% of KiwiSaver investors expect that their funds are invested responsibly and ethically. But even KiwiSaver providers that claim to be sustainable aren’t necessarily being 100% transparent.
Part of the problem is that there are no set guidelines for a fund to use labels like ‘ethical’ or ‘responsible’ or ‘sustainable.’ There is no uniformity in reporting and disclosure requirements. Without a common language around what qualifies as responsible investing, fund managers can easily - and inadvertently - mislead investors.
Some providers are willing to list specific areas they won’t invest in - like tobacco and GMOs, for instance - but that doesn’t mean they aren’t investing in things like weapons and animal testing. So, just because your KiwiSaver provider might advertise their investments in environmentally-friendly companies, that does not mean their investments exclude everything possibly detrimental to the earth - or its inhabitants.
Consider these stats:
74% of Kiwis don’t want their KiwiSaver fund to be invested in fossil fuels. But $2.8 billion in KiwiSaver and retail investment funds go to companies that provide oil, gas, and coal.
85% of Kiwis think it’s wrong to invest in companies that use animal testing. But $3.4 billion is directly invested in companies that test on animals for non-pharmaceutical use.
81% of Kiwis say it’s important not to invest in weapons manufacturing. But as of 2021, $15 million is still supporting nuclear weapons.
About a year ago, the media found out that Jacinda Ardern’s KiwiSaver provider was investing in companies that supplied the Saudi military. While ANZ’s website said, “you can be confident your money is being invested responsibly”, apparently, that didn’t cover weapons used in a war that caused a humanitarian catastrophe. A report showed that 15% of ANZ’s Growth fund was invested in “fossil fuels, weapons, gambling, alcohol, GMOs, animal testing, human rights issues and environmental violations.” Even our Prime Minister is unaware of what her KiwiSaver fund is supporting. KiwiSaver providers have some work to do around being clear and transparent.
We have all seen the distressing images of the attacks on Ukraine in recent news. Financial author Frances Cook points out that some KiwiSaver funds were directly invested in Russian bonds - essentially lending money to Vladimir Putin’s regime. Many funds have since pulled out of Russian investments.
Even if your KiwiSaver provider is transparent about their direct investments, they could be indirectly invested in areas you find unacceptable. Your provider invests in a company - but then what does that company do? Who are their suppliers and business partners? Since your provider doesn't directly invest in those companies, they don’t have to declare an association.
There’s enough confusing jargon around KiwiSaver. You shouldn’t have to worry about researching deep into the investments to find out what your money is supporting.
What can you do?
At BetterSaver, our vision is to transform Kiwi futures by providing accessible financial advice. We focus on KiwiSaver because more than half of Kiwis are invested in it, making it the easiest way to make the biggest difference.
We are frustrated by the KiwiSaver industry's lack of transparency and clarity. That’s why we do the hard work of collecting information from reputable sources to analyse KiwiSaver funds and make the information accessible. Everyone has a right to know exactly what their money is invested in.
We identified eight ethical issues that many Kiwis care about:
Adult Entertainment
Alcohol
Animal Testing
Controversial Weapons
Gambling
Nuclear Power
Tobacco
Small Arms
We look at each KiwiSaver fund’s average exposure to each ethical issue over the past year (from Morningstar data) and normalise this across all assessed funds to assign a score of no, low, medium, or high exposure to each issue. Further, we use Morningstar’s Sustainability Rating Index to determine a fund’s BetterSaver sustainability score (low, medium, or high).
By doing this, we can confidently provide our customers recommendations for a KiwiSaver fund that weighs their ethical preferences alongside returns, volatility, and fees. It is vital that you are in a fund that enables you to reach your financial goals while feeling good about what your money is supporting.
So this Earth Day, take five minutes to take our fund finder quiz and switch to a KiwiSaver fund that matches your ethics. It’s an easy way to support our planet and its people.