How Socially Good is Your Investment?

How BetterSaver scores KiwiSaver funds

Piggy-bank-shaped pot plant growing a small tree

BetterSaver Social Good Score

BetterSaver scores each fund based on the following five factors, and then weighs their importance to give an overall Social Good score. You, as a KiwiSaver investor, can (and should!) weigh up the factors yourself — everyone has their own idea about which factors constitute an ethical or responsible investment.

The other thing you need to remember is that no-one is perfect. A high Social Good score is no guarantee that a fund or manager won't slip up, or won't take an action that you might disagree with. And of course, scores will change over time.

1. The Fund Manager ESG (16%)

2. Exclusions (24%)

3. Inclusions (24%)

4. Engagement (24%)

5. Membership and Research (12%)

How did we create the Social Good Score?

We have used the following work from Dr Rodger Spiller to assist with creating the Social Good Score.

Dr Rodger Spiller is New Zealand’s most experienced and qualified ethical investment adviser. He has offered ethical investment advice through his business Money Matters for over 25 years and has a PhD in ethical investment and business. Rodger’s "Four P’s of Ethical Business and Investment" is a contemporary approach originally developed in his PhD in the 1990’s as a framework and Ethical Scorecard for researching the companies in which an ethical fund would invest. It has been applied locally and extensively referenced internationally.

Money Matters offers independent, personal, ethical investment advice to investors with portfolios of over $250,000. Contact Rodger for further information including copies of his ethical investment book chapters here: www.moneymatters.co.nz. Rodger Spiller is an Authorised Financial Adviser and his Disclosure Statement is available on request and free of charge.

Dr Spiller has no commercial interest or shareholding in BetterSaver Ltd.

Piggy-banks balance ecology with industry

Ethical investment in New Zealand
By Dr Rodger Spiller

A Wake Up Call

KiwiSaver investors received a wake-up call in 2016 when an RNZ and NZ Herald investigation revealed that many funds were invested in companies that were involved in activities prohibited for investment such as cluster munitions, anti-personnel mines and nuclear explosive devices. Still more were unknowingly invested in tobacco. The investigation concluded that "millions of New Zealanders have unwittingly invested in tobacco and controversial weapons".

As the demand from investors wanting to take account of ethics has increased, many fund managers have begun actively promoting themselves and their funds as ethical or socially responsible investors. The range of approaches varies greatly; from those still only complying with the legal minimum exclusions — or just adding exclusion of tobacco and/or gambling — through to those taking a more comprehensive approach.

Some of the biggest funds in the country may consider themselves to be socially responsible investors, but an analysis shows few can actually prove it… investing in the area is still a minefield. RNZ

Going Beyond Compliance

Just complying with the law, would for most investors, not automatically mean that a fund qualifies as an ethical or socially responsible investment. For example, complying with the legal requirement not to invest directly in companies making cluster bombs and land mines, doesn’t mean that the manager isn’t investing in other unethical — but legal — activities. Furthermore, some fund managers are now depicting themselves as ethical investors simply because they have decided not to invest in just one of these unethical areas.

Investors need guidance to sort the wheat from the chaff. Speaking at the time of the media controversy over KiwiSaver, then Prime Minister John Key was reported in the NZ Herald as advising: "So in the end every KiwiSaver investor, I guess, needs to look at the investments they are making and make a decision about whether that’s an ethical investment".

Comparing Funds

Three main aspects of ethical investment when comparing funds are exclusions (i.e. what does the fund avoid investing in?) inclusions (i.e. what does the fund seek to invest in?) and engagement (i.e. to what extent does the fund engage with the companies and other entities it invests in, to encourage better practice?).

Funds vary greatly in the depth and breadth of approaches – from shallow and narrow to comprehensive and broad ranging. Consideration of the approach is an important determinant in comparing funds. There are also other aspects of ethical investment to consider such as membership of responsible investment associations and subscription to specialist responsible investment research.

The information required to consider these aspects ought to be publicly available on the fund manager’s website, as a KiwiSaver investor would typically only have access to this level of information. A lack of disclosure could mean a fund manager doesn't compare as well as it could. This may encourage providers to include more information in future.