Ki­wiSaver funds get ethics C+

The Southland Times - - News - Rob Stock rob.stock@stuff.co.nz

No Ki­wiSaver fund has scored more than a C+ in a new A to F rat­ings scale de­vel­oped to show in­vestors how so­cially re­spon­si­ble their funds are.

Bet­terSaver has been de­vel­oped by for­mer Fisher Funds mar­keter Joe Tay­lor, and is based around an easy-to-un­der­stand al­pha­betic scale that ev­ery­one re­mem­bers from school.

It’s the first time all New Zealan­ders are of­fered the abil­ity to se­lect their re­tire­ment fund ac­cord­ing to an in­de­pen­dently ver­i­fied en­vi­ron­men­tal, so­cial and gov­er­nance (ESG) grad­ing sys­tem, Tay­lor said.

‘‘Up un­til now Ki­wiSaver providers have been able to claim that they con­sider ESG mat­ters when they in­vest, but there has not been the abil­ity to in­de­pen­dently ver­ify the truth or ex­tent of their ESG com­mit­ments,’’ he said.

ESG is one of the buzzwords of the in­vest­ment world, re­fer­ring the three big ar­eas that fund man­agers are in­creas­ingly re­quired to think about by in­vestors: The im­pact of their in­vest­ments on the en­vi­ron­ment, on so­ci­ety, and, the least un­der­stood, whether com­pa­nies are well-run.

Bet­terSaver’s scale was de­vel­oped with the help of Dr Rodger Spiller, the coun­try’s fore­most ex­pert on re­spon­si­ble in­vest­ing.

Tay­lor did think about us­ing a star scale, but said: ‘‘We went with an A to F scale be­cause it’s a bit more in-your-face, and peo­ple can un­der­stand it more eas­ily.’’

‘‘Ev­ery­one knows that an F is a fail, and a C is barely pass­ing.’’

One of the aims of the scale was to en­cour­age Ki­wiSaver providers to im­prove their ESG per­for­mance, though not nec­es­sar­ily to get them all to be­come deep green, eth­i­cally-pure in­vestors.

The ma­jor­ity of Ki­wiSaver providers were very poor at com­mu­ni­cat­ing how they went about their work.

Tay­lor found many Ki­wiSaver providers made bland state­ments such as ‘‘we take en­vi­ron­men­tal, so­cial and gov­er­nance into ac­count when in­vest­ing’’, but pro­vided no de­tails.

Al­most none re­port an­nu­ally to savers how they have lived up to their ESG claims.

Sim­ply by im­prov­ing their com­mu­ni­ca­tions, most Ki­wiSaver schemes could im­prove their rat­ings on the scale.

There’s a grow­ing de­sire from the pub­lic for Ki­wiSaver in­vest­ments that match savers’ ethics, and in re­cent years Ki­wiSaver schemes have been forced by pub­lic out­cry to re­move weapons-mak­ers and to­bacco mak­ers from their port­fo­lios.

Bet­terSaver’s rat­ings scale is based on scor­ing funds on five mea­sures: Ex­clu­sions (what they won’t in­vest in, such as to­bacco and bombs), in­clu­sions (en­vi­ron­men­tally and so­cially pos­i­tive in­vest­ments), how trans­par­ent the fund man­ager is about where and how it in­vests, en­gage­ment (does it vote its shares in com­pa­nies and im­prove their be­hav­iour), and how it con­ducts its ESG re­search.

Cur­rently, Bet­terSaver will earn com­mis­sion from some providers when some­body uses the plat­form to switch their Ki­wiSaver, but that’s not how Tay­lor ex­pects to make money, es­pe­cially as the com­mis­sion deals are with Ki­wiSaver providers who do not rank par­tic­u­larly well on the A-F scale.

The ge­n­e­sis of the busi­ness was his time work­ing in the Ki­wiSaver in­dus­try for Fisher Funds. His friends would ask for ad­vice, which reg­u­la­tions pre­vented him from pro­vid­ing.

‘‘I’d re­fer them to the in­for­ma­tion avail­able on­line, but they would of­ten come back com­plain­ing that it was too dif­fi­cult to com­pare the dif­fer­ent op­tions as there was so much in­for­ma­tion.’’

‘‘We went with an A to F scale be­cause it’s a bit more in-your­face, and peo­ple can un­der­stand it more eas­ily.’’ Joe Tay­lor of Bet­terSaver

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