Under a cloud: Is your KiwiSaver fund fuelling climate change?
KiwiSaver funds have more than $500 million invested in the 20 biggest fossil fuel producers that have been linked to a third of all carbon emissions in the modern era, research has found.
United States research group Climate Accountability Institute this month released data on how much each of the largest oil, natural gas and coal companies have contributed to the climate crisis since 1965.
It found the top 20 companies have collectively contributed 480 billion tonnes of carbon dioxide and methane to the world — equivalent to 35 per cent of all worldwide fossil fuel and cement emissions.
Although 12 of those companies are state-owned many others are publicly listed companies whose shares can be owned by investors including KiwiSaver funds.
Those companies include the likes of Chevron, ExxonMobil, BP, Shell, ConocoPhillips and BHP.
KiwiSaver funds also buy bonds, which is money lent to companies from the likes of Gazprom, Pemex, Petroleos de Venezuela, PetroChina, Abu Dhabi National Oil Company, Kuwait Petroleum Corp, Petrobras and Coal India.
Now Kiwi ethical research charity Mindful Money has revealed which KiwiSaver funds have the highest exposure to these fossil fuel producers.
It found $502.3m was invested via KiwiSaver funds in those companies and $344m of that invested via just 20 funds.
As a percentage of funds under management some funds are highly dominated by fossil fuel investments.
SuperLife — the KiwiSaver provider owned by New Zealand’s stock exchange the NZX — dominates the top five funds with four out of the five funds with the highest exposure as a percentage of their funds under management.
Nearly a third of the money in Superlife Australian Resources fund are invested in the biggest fossil fuel companies.
Hugh Stevens, chief executive of Smartshares, which is the manager of the SuperLife KiwiSaver scheme, said it invested in index-tracking exchange-traded funds for which the key benefits were that they were fully transparent and low cost.
But that means they also don’t pick which companies they do or don’t invest into.
“The managers of index tracking funds, including the Smartshares and SuperLife funds, do not select the investments. “That choice is made by the index provider and then the investors are able to choose which index they wish to invest in.”
Stevens said it published a full list of all investments in the index funds, which allowed investors to see what they were buying into.
It also offered an Ethica KiwiSaver fund, which it was actively promoting.
“Ethica is a low cost and highly performing fund that is managed to strict environmentally conscious rules.”
When it comes to the biggest amount of money invested in the 20 biggest fossil fuel companies the top five funds are dominated by big providers ASB and Kiwi Wealth.
ASB’s growth fund had the most invested at $56.5m.
An ASB spokeswoman said responsible investment was integrated into its investment decision-making process, but was not the only consideration.
“We also have a fiduciary duty to provide good risk-adjusted returns to our investors.”
It too uses an index-tracking investment management style, which means it matches the market and composition of companies within it.
“ASB Kiwisaver Scheme is the largest single KiwiSaver scheme, which means it isn’t surprising that any nominal allocation will appear large relative to market.”
She said ASB had recently launched a positive impact fund for those investors who wanted their values to have a larger impact on where their savings are invested.
Barry Coates, founder of Mindful Money and a former Green Party MP, said most New Zealand investors felt uncomfortable with their savings being invested into fossil fuel companies.
He points to research carried out by Colmar Brunton on behalf of Mindful Money and the Responsible Investment Association of Australasia last year, which found 76 per cent of those surveyed thought it was important to avoid investing in fossil fuel companies.
Coates said there were two major reasons why KiwiSaver funds should consider getting out of fossil fuel companies: their customers don’t want them to invest in them, and there are financial risks to investing in them.
“There are financial risks with holding fossil fuels companies that face increasing risks, for example, the current law suit against ExxonMobil, and the likely decline in their core business.”
He said there was also increasing evidence that divestment from fossil fuels had not reduced returns and in the future was likely to result in higher returns.
“As responsible institutions that care about the climate crisis and the future they should avoid fossil fuels.”
Out of more than 200 KiwiSaver funds only 11 funds exclude fossil fuels.
Coates said very few KiwiSaver providers disclosed their direct investments in fossil fuel companies and none of them included their indirect investments.
“This is only available through Mindful Money’s website.”