How to pick the best KiwiSaver fund for your retirement, and the planet

This article originally featured on Stuff and was written by Kate Green. 

Choosing a KiwiSaver fund can seem daunting, with a whole lot of choice and a fair amount of greenwashing pervading the industry. Ethical fund management company Pathfinder’s chief executive John Berry spoke with Kate Green about how we can do good with our savings.

What drives your company?

When it comes to being a conscious consumer we believe your decisions around investing your dollar are as important as your decisions for spending your dollar. We want the way we invest to drive individual wealth and collective well-being.

We set Pathfinder up in 2009, and launched our first ethical fund a year later, our Global Water fund.

A decade ago many thought ethical investing was for hippies, but thankfully now it’s widely accepted. Kiwis generally care about where and how their savings are invested.

So is it all about avoiding funds which invest in harmful industries?

That’s only the start. It’s not hard for a KiwiSaver to avoid the basics; tobacco, gambling, nuclear weapons. Do they go further, avoiding coal and oil companies, or factory farming? A good tool for this is the Mindful Money website, which shows you all the nasties in your KiwiSaver fund.

Ethical investing is much more than simply avoiding harm. I don’t believe we’re going to meaningfully change the world just by avoiding things.

What does investing positively look like, then?

Investing positively means focusing on areas that will benefit our world, like energy efficiency and water availability. It also means voting as a shareholder.

Investing positively also requires putting in the effort to seek out impactful companies not yet listed on a stock exchange. We want to back future winners who are hustling to make the world better and also make good financial investments.

How do I spot the fakes?

You should expect to see a lot more than just a policy around being ethical and a smart website. Dig deeper.

Maybe flip the question on its head and say, ‘I’m going to look for good, I’m going to look for authenticity’. Putting marketing aside, do they really believe in what they are doing?

If they have lots of funds but only label one as ethical, it may signal that they’re not genuinely walking the talk.

But it’s so much more convenient to have all my money in one place. Is that bad?

There’s no need to have your KiwiSaver with your bank. A different provider may better align with your values.

I understand the convenience of seeing your KiwiSaver balance with your bank accounts, but this encourages people to check their KiwiSaver far too often.

In March last year, markets were briefly in freefall because of Covid-19. Tens of thousands of people switched their KiwiSaver from a growth fund to a conservative fund, but when markets bounced back, they’d already locked in that loss. Because they’d moved, they didn’t catch the rebound.

It’s natural to be fearful when markets fall, but checking your balance too often increases anxiety and can lead to a value-destroying switch to a low risk fund like thousands did in March and April last year.

Can I be ethical and still get the most bang for my buck?

Absolutely! Academic research offshore and actual returns data tells us you don’t have to worry that doing good with your investments will cost you in terms of returns.

Investing in ethical companies is essentially choosing high quality companies. Those with a purpose care about their interaction with the environment and communities. They tend to have more staff engagement and more customer loyalty, so they’ll likely be more profitable.

I strongly argue you’ll get the same if not better returns by considering environmental and social factors as well as financial factors.

Okay, I’m convinced. But switching sounds like a lot of effort.

Not at all. Moving your KiwiSaver is easy and entirely digital, there are no paper forms. All you will need is your IRD number, and your driver’s licence or passport.

It should take only two or three minutes, and then the new fund manager does everything else. You don’t have to have an awkward phone call with your current provider and explain why you’re leaving. It’s your money.