Simplicity divests from oil, gambling
The Simplicity KiwiSaver scheme is to exit all investments in companies profiting from fossil fuels, pornography, alcohol, weapons and gambling.
Founder Sam Stubbs said running the numbers over the past five years indicated there were higher returns for ethical investors focusing their investments on other sectors such as healthcare and technology.
Simplicity is a recent addition to the KiwiSaver market, but had Simplicity been investing with these exclusions for the past five years, its returns would have added an extra 0.19 per cent and 0.76 per cent onto its funds, depending on whether they were growth, balanced or conservative.
The move, which Simplicity hoped to complete by the end of the year, would see it exclude roughly 2800 companies out of more than 20,000, including the likes of BHP Billiton and Rio Tinto (mining); Mitsubishi, Lockheed Martin and 3M (weapons); and Exxon Mobile and BP (fossil fuels).
Anheuser-Busch, Heineken Holding, Kirin Holdings, Asahi Group Holdings, Diageo and Pernod Ricard are all alcohol makers and distributors that will be ejected from the scheme.
But the alcohol ban could also see British supermarket companies Tesco and Sainsbury’s excluded.
Consumer NZ found investing in pornography worried KiwiSavers more than weapons, but it’s a groundless fear. There are virtually no listed pornography companies.
The economics of porn have been undermined by the deluge of ‘‘free’’ content available online, though there is a growing movement in the United States to label social media’s listed giants such as Twitter, Amazon and Google-owned YouTube as ‘‘distributors’’ of pornography, some of it hardcore.
In New Zealand, casino and entertainment company SkyCity Entertainment Group is the only listed company that would be excluded.
Excluding those sectors would see the proportion of the Simplicity KiwiSaver scheme’s funds invested in healthcare and technology rise.
Simplicity already excluded investments in nuclear weapons, tobacco, landmines and cluster munitions, following media reports that highlighted the inclusion of those industries in KiwiSaver funds, Stubbs said.
‘‘Excluding investments in these additional areas is a global trend that makes sense for our members. They should receive better returns, and it’s what KiwiSaver members want.’’
As KiwiSaver was a long-term investment, in which people could have their money invested for more than 20 years, the compounding effect of those extra returns would add up.
‘‘The data clearly shows that these exclusions should be better for future returns and reflect a global trend,’’ Stubbs said.
He said the weaker returns of the excluded industries could be put down to a growing reluctance of investors to put money into them, resulting in them having to pay more for their capital.
It was no longer possible to get insurance for deep-sea extraction of oil following the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, leading to oil companies having to write down the value of their underwater oil reserves.
‘‘Traditional ‘sin stocks’ no longer provide better returns. People are voting with their wallet,’’ Stubbs said.