We know that many New Zealanders want to invest ethically but don't have the objective information and research to compare the options. This guide outlines the simple steps to transition your money to reflect your values.

It's quick, easy and free.

Most Kiwis are aware of the ways that their purchases have an impact on climate change, the environment, or people.

Not buying factory-farmed eggs or cosmetics tested on animals. Choosing fair trade, less carbon-intensive or lower waste products. Walking more and driving less. These are all small changes in our lives that collectively put pressure on companies to change their behaviour.

Investing is no different. How we choose to invest our money makes a real impact.

It’s up to you to decide whether that’s a negative or positive impact.

You can earn good returns

It’s a myth that investing ethically means lower returns. In fact, research has shown that ethical investing earns returns that are as high or higher than conventional investing.

Why are the returns on ethical investment proving so high?

This is because companies with high sustainability standards are the most trusted companies. They have loyal customers and motivated employees. They have lower risks – they don’t get sued for environmental damage and they don’t operate in declining industries like coal or oil. As a result, their financial returns are high.

By contrast, there has been a string of companies that have behaved badly and suffered financially as a result - VW, BP, Enron, Solid Energy (Pike River mine).

As an example, the chart above shows the value of investments in fossil fuel companies over the past ten years against the S&P 500. Since 2015, there have been ample warnings about the high risk of unusable oil, gas and coal reserves – our planet would fry if we used them all. These ‘stranded assets’ are likely to be worthless.

This chart shows the trend. Over the past 5 years, the average price of shares (S&P500 index - Grey) has almost doubled while the Oil & Gas Index has halved (Orange), and coal has collapsed (Blue). More than half the coal mines in the US have shut down and the biggest coal company went into bankruptcy. By contrast, cleantech and sustainability sectors are growing rapidly.

It’s easy to find out, all you will need to know is:

• Which KiwiSaver fund or investment fund provider you are with
• What type of fund you are in (conservative, growth, etc).

You can then decide whether that’s OK, or if you can use the Fund Finder to find a more ethical option.

Even though most Kiwis want their fund providers to avoid unethical investments, $4.1 billion of KiwiSaver funds are invested in the sectors that are of most concern.

Choosing a fund that aligns with your values will ensure that your money isn’t being used to fund harmful impacts, but instead, more of your money is used to support good companies and positive impacts.

Traditional Funds

These are most investment funds. Their purpose is to manage risk and earn returns, and they ignore the impact the companies have on the environment and society.

Ethical or Responsible Investing

There are three main approaches:
Avoid harm
These funds screen out the sectors which cause social or environmental harm, for example, tobacco, fossil fuels, etc...

Engage
Most funds now use Environmental, Social, and Governance (ESG) factors to evaluate companies and reduce their risks. These funds usually exclude the worst companies and engage with others as an active shareholder to improve their ESG performance

Better companies
Some funds target investments into businesses with higher ESG or sustainability standards like All Good Organics or Kathmandu

Impact Investing

Investing to directly create a measurable, positive impact, while still making a financial return. Examples of ‘impact investing’ are investments in renewable energy, social housing, or healthcare. A related but broader concept is tikanga-led investing, which has embodied this approach within a te Ao Māori worldview.

We hear from so many people that they would like to switch but they are put off by thinking it is really difficult to do. That’s why we set up the Mindful Money website: we have done the research so you don’t have to.

Choose a fund that suits you

Use Mindful Money’s Fund Finder tool to find the funds that meet your criteria. We take you through three easy questions:

1. What values are most important to you?
2. What investment approach do you want to use?
3. What is your risk profile?

Being prudent means taking the time to find out about what’s available and only investing when you have considered your options. Finding out your risk profile is one of the crucial steps in your investment decision.

Investments are often put into different categories, depending on the level of risk:

• Defensive – a high proportion of relatively safe investments (such as cash or short term deposits)
• Conservative – a high proportion of debt (generally bonds) and less shares
• Balanced – a balance of debt and shares
• Growth – mainly company shares, generally listed on seigk exchanges
• Aggressive – some high growth, high-risk shares including small unlisted companies or property

If you are young and saving for the long term, you may choose to accept higher risks (on the basis that the highs and lows even out over time). Those who are approaching retirement generally prefer less risk, to ensure their savings are protected.

There is a very handy guide to finding out your risk profile on the Sorted website.

Make the switch

Once you’ve selected your criteria, the Mindful Money website shows you four options that most closely match your criteria. You can find out more using the Fund Details button, and when you’re ready, choose to switch your KiwiSaver fund or make an investment. The Referral page will link you directly to the fund provider’s application form.

Help build the Mindful Money Movement

As a new charity, Mindful Money is trying to get the message out. We don’t have big budgets for advertising, so it’s up to you! Some ways you can contribute to our movement are:

• Please share far and wide on your social networks and pass this guide onto others
• Invite us to talk at workplaces or an event - email info@mindfulmoney.nz
• Become a Mindful Money ambassador!
• Donate to our charity 

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