Money and morality
Banks and KiwiSaver providers like to be seen to be doing the right thing, but sometimes their decision-making isn’t straightforward. Rob Stock reports.
Kiwibank doesn’t call itself an ethical bank, but it’s the only bank to have an ethics committee with the power to ‘‘off-board’’ dodgy lenders.
The bank, while stopping short of badging itself ‘‘ethical’’, has decided there are businesses it wants nothing to do with.
They include ‘‘third-tier lenders’’ and high-price truckshop businesses that plague poorer communities.
But the ethics committee, which scrutinises red-flagged applications to open accounts, also has the power to blackball any business the bank believes is profiting from exploiting vulnerable people, said Mark Wilkshire, the bank’s general manager for marketing.
Kiwibank’s stance on truck shops and exploitative lenders follows its decision two years ago to provide funding for the Nga¯ Tangata microfinance scheme.
Nga¯ Tangata helps borrowers get out from under the heels of the likes of payday lenders charging interest rates of 300 per cent or more.
Banks plan to show their commitment to the financially ‘‘excluded’’ by holding a summit in South Auckland early next month to brainstorm ways to bring more people into the mainstream banking system.
Wilkshire stopped short of calling on the major Australian banks to join Kiwibank’s embargo on third-tier lenders, not wanting to be accused of organising a cartel-style operation.
Three other banks – Westpac, ANZ and BNZ – also refuse to bank truck shops, but no bank has made an ethical play in New Zealand like Triodos has done in Holland, and the Co-op Bank did in the UK before hitting trouble.
Taking an ethical stance involves drawing some hard lines, which New Zealand banks have stopped short of doing. It also involves careful monitoring to try to identify existing customers who are involved in dubious business activities.
Even in the most controversial industries, banks say they treat every customer on a case-bycase basis.
BNZ, for example, ‘‘may’’ decline to bank a brothel business, but it might not, leaving customers guessing on whether their deposit money is helping fund an industry they disapprove of.
Kiwibank has a similar ‘‘may/ may not’’ stance on banking companies involved in the
‘‘Everyone’s got their own view on what’s ethical, and what’s not.’’ Mark Wilkshire, Kiwibank’s general manager for marketing, above
alcohol industry, judged on a case-by-case basis.
‘‘Everyone’s got their own view on what’s ethical, and what’s not,’’ said Wilkshire.
‘‘Some people say ‘if it’s legal, it’s fine’, and we say, ‘No, that’s not good enough’,’’ he said, citing Kiwibank’s refusal to bank synthetic cannabis producers back when it was not illegal, and its decision not to bank tobacco producers and importers.
KiwiSaver has come under the ethics microscope, and many KiwiSaver schemes have taken ethical stances. Kiwibank sister company KiwiWealth avoids investments in industries the majority of Kiwis don’t want a bar of, such as tobacco, ‘‘controversial’’ weapons, and anyone involved with whaling.
Like banks, though, KiwiSaver schemes can also leave customers guessing.
For example, KiwiWealth also takes a case-by-case approach to excluding investments in ‘‘sensitive’’ industries such as defence and firearms, fossil fuels, and gambling.
Ethical investment expert Rodger Spiller from Money Matters said ethical investors tried to be consistent with all their money, including the bank they used.
Often they defaulted to a smaller, locally-owned bank like the Co-operative Bank, Kiwibank (owned by PostShop), or TSB, which is owned by the Taranaki community.
Pressure has gone on banks on the other side of the Tasman to get clearer about their ethical stances; the largest ethical investment fund has responded strongly to banks’ abuses of customers.
It has published a list of the banks it will invest in, which does not include ANZ, or Commonwealth Bank of Australia (owner of the ASB).
NAB (owner of BNZ) made it on to the good bank list because it funds a community finance loan scheme, like its subsidiary BNZ does here, and has put in place a positive climate plan.
Westpac made it on to the good list because it refused to fund the development of the Adani Carmichael coal mine in Australia.