Is this the year you’ll invest ethically?
If ever there was a year to start investing ethically, it’s 2022. We’re not even one-third of the way into the year and already we have a new dire warning from the United Nations about climate change and the invasion of Ukraine, which sent KiwiSaver and investment fund managers into a tailspin over their Russian investments.
Hard on the heels of the Afghanistan takeover by the Taliban, the war in Ukraine beamed on to our TV screens and devices. Both conflicts hit home for many New Zealanders in a way that struck to the core. Any one of those people could be us.
I wrote in February about how KiwiSaver drives climate change more than individual actions such as driving less or going vegan. Of our individual carbon footprints, about 3.4 tonnes of CO2 of the 11.1 tonnes in total comes from our KiwiSaver.
But there are even more reasons to switch your investments to more ethical ones. If enough of us do it, ethical investing will become the majority, not the minority.
Mindful Money’s Barry Coates warns to beware of greenwashing when choosing a KiwiSaver fund. Greenwashing is either creating a false impression or providing misleading information to suggest a company’s products are more environmentally sound than they are.
At first glance, all the KiwiSaver providers seem to have good green credentials. Beneath the surface, some are a lot less ethical than they could be. While the truly ethical KiwiSaver funds have excluded fossil fuels from the portfolio holdings, for example, there is still a whopping $1.5 billion of our retirement savings invested in fossil fuels.
All too many KiwiSaver funds had money in Russia’s major oil and gas companies. They should instead invest in climate transition, says Coates. Or at the very least, energy companies that are transitioning away from fossil fuels. “An example is the Danish company Orsted, which has transitioned from fossil fuels to wind power,” says Coates.
I have to admit to being occasionally lazy (or busy, my friends would say). Although my money is with an ethical fund, I had some interactions with my bank’s KiwiSaver operation under a power of attorney earlier this year and thanks to the downright appalling customer service, combined with the Ukraine situation knocking me off my apathetic stool, I did a bit of digging. In particular, I looked into what the bank in question’s KiwiSaver growth fund invests in. The fund had 9 per cent of its money in companies involved in fossil fuel, weapons, tobacco, adult entertainment/ pornography, alcohol, palm oil, GMOs, human rights and environmental violations, and 85 companies that do animal testing. That’s rather eyepopping.
Compare that with the Pathfinder KiwiSaver Growth Fund, which has zero investments in issues of concern according to Mindful Money.
Truly ethical funds avoid the bad stuff, but actively invest in companies that do good. They also engage with the companies they invest in to improve outcomes. That’s not just environmental, it includes social change as well.
There has long been an idea that ethical investments don’t perform as well as ordinary funds that invest across the board. There is data around to say otherwise. I noted, and it’s not a scientific comparison, that the second most ethical KiwiSaver on the Mindful Money platform, Booster Socially Responsible High Growth Fund, had returned 13.93 per cent per annum over the past three years
compared to 9.63 per cent for the same period for the bank that invested in all those nasties. Pathfinder doesn’t have three years’ figures to compare. For the record, the fees on the Booster fund are higher than the bank. But that doesn’t make up for the difference.
I have a little mantra that often kickstarts me when I really mean to do something. It’s “do it now”. Do some research into what your KiwiSaver and other funds invest in under the clean, green, ethical cover. If you don’t like it, switch. It’s easy.