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
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".
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.