Is your KiwiSaver fund ethical?
Who knew that your KiwiSaver drives climate change more than individual actions such as driving or flying less, or going vegan?
Few people do, says Mindful Money founder Barry Coates.
“We’re all aware we can eat less meat fly less, drive less, use less energy. But most of us don’t know that perhaps the most powerful action we can take is to decarbonise our KiwiSaver or our investment fund,” says Coates.
Choosing your KiwiSaver and other investments wisely can really make a massive difference at a personal level. The average New Zealander’s carbon footprint is approximately 11.1 tonnes of CO2. A staggering 3.4 tonnes of that is from KiwiSaver alone.
Not all KiwiSaver investments are as green as they claim to be. We’ve all seen the ads about how they don’t invest in sin stocks such as fossil fuel, gambling and tobacco. That’s old hat these days. Increasingly KiwiSaver funds are going the extra step.
The issue with KiwiSaver and other investments is the companies they invest in. Coates says about $1.5 billion is being invested in fossil fuels alone through KiwiSaver funds.
People keep investing in these funds because they think they’ll make money, says Greenpeace programme director Niamh O’Flynn. The business-as-usual mindset is a really old-school way of thinking, she says.
“Until the finance sector takes a meaningful stand against climate polluting industries, it is minimising its role in the urgently needed energy transition and failing to act responsibly as custodians of the people’s wealth,” O’Flynn says.
We can help in that stand, by choosing our KiwiSaver wisely.
“The question is not whether there is customer demand for ethical investment options but rather whether the financial sector will take accountability for the issue of our time.”
O’Flynn cites the American environmentalist Bill McKibben, who once said: “If it’s wrong to wreck the climate, it’s wrong to profit from that wreckage.”
Mindful Money, which is a charity that promotes ethical investment, rates KiwiSaver funds on how well they avoid concerns and how they apply higher standards. Only five of 28 providers met the grade on both.
AMP, Booster and Pathfinder have funds that received a double tick on both criteria. Not all the funds from those providers were double ticked. In the case of AMP, for example, only its Balanced Fund No 2 was included in the list.
I should add that Medical Assurance Society funds, and some of the Kiwi Wealth funds, meet the criteria as well, but haven’t joined Mindful Money.
Switching KiwiSaver or other funds isn’t going to miraculously lower your carbon emissions directly, says Coates. “What you emit through your investment funds is not immediately going to go away by changing the fund. But you can significantly influence that output from your investments.”
Divesting of those companies doing the most damage is a good thing. The equation is more complex than that, however. Dean Anderson, founder of Kernel Wealth, makes the point that sometimes you can do more for the environment by investing in a polluter and using your investment to press for change. More and more of our KiwiSaver providers are engaging with the companies they invest in in this way to reduce their emissions.
Anderson adds that it’s becoming increasingly easier to choose investments outside of KiwiSaver that follow an index of very targeted companies. You can, for example, choose a fund that tracks the S&P Global Clean Energy Index, whereas back in the day you couldn’t drill down to such a specific range of companies Like the top 50 or 500.
Finally, switching KiwiSaver is super-simple should you choose to do so. It literally takes two minutes providing you have your IRD number, and driver’s licence or passport handy. The Mindful Money search will take you to the forms to switch, or you can visit the individual provider’s website.