Investing with Heart by Good Magazine

This article originally featured in Good Magazine in April 2025 and was written by Amberleigh Jack.

With KiwiSaver funds surpassing $100 billion in 2024 for the first time since its launch in 2007, investing is undoubtedly a growing interest for New Zealanders. Increasingly, says Olive Coulson of ethical investment charity Mindful Money, people care about where that money is going. War has been the “biggest wake-up” in aligning investments with personal values, she says. Mindful Money’s 2024 Consumer Demands Report found that 77 percent of respondents expect ethical management of their funds, and 54 percent would consider switching if their current provider didn’t align with their values.

But in a world of economic buzzwords, where does the everyday investor start? Christopher Walsh, head of research at Moneyhub, says it’s “a very sensitive question” because it is inherently personal. He says fund managers take different approaches, so it’s important to check each policy carefully. David Copson, head of business development and advice for Kiwi company Booster, says its socially responsible funds exclude industries like tobacco, alcohol, gambling, armaments, nuclear power, pornography and fossil fuel industries. “We also exclude investments in directly held companies where the underlying activities are principally involved in animal testing on non-medical products, factory farming, genetically modifying organisms, livestock exports, whaling, recreational cannabis and palm oil production.” 

But beyond exclusion, ethical investing can also be about positive impact – supporting industries that drive change. The Booster Innovation Fund, for example, invests in innovative New Zealand companies tackling health and environment challenges, including climate. “We’re finding a lot of people are excited by the idea they can help grow Kiwi companies and get a slice of them at the early stages of their journeys,” says David.

‘Good’ with Good Returns

For 48-year-old Ben (last name withheld), ethical investing means looking at industries and companies that contribute to a “clean, green New Zealand.” He started investing with an ethical lens about a decade ago; previously, he held shares that weren’t entirely “bad” but not necessarily “good.” His interest in ethical investments deepened about six years ago when he began researching companies with strong commitments to sustainability. “I liked the idea of supporting businesses that prioritise ethical practices and transparency in their supply chains,” he says. It helped that the returns were good, too. 

Since 2019, Mindful Money has concentrated on providing transparency for Kiwis regarding the investments in their KiwiSaver and managed funds. Annual surveys have shown, says Olive, its marketing manager, that the categories Kiwi investors want to avoid have remained “pretty consistent”. The big six are weapons, human rights abuses, environmental harm, social harm, animal welfare and fossil fuels. According to Mindful Money’s most recent data, KiwiSaver currently has more than $3 billion invested within the fossil fuels category and more than $650 million in environmental harm.

Be Mindful of Greenwashing

Is ensuring an ethical investment as simple as looking for a tick or logo on your provider’s site? More than half the responders to Mindful Matter’s 2024 Consumer Demands Report were concerned about greenwashing by fund managers. “I warn people a lot about marketing jargon,” says Olive, who points to Australian funds that landed in court over marketing claims. In June 2024, the Federal Court of Australia found Active Super to have “misleading” environmental, social and governance (ESG) claims in its marketing and investment material.

Last September, in a follow-up to a New Zealand 2022 review, New Zealand’s Financial Markets Authority did not identify “any situations where an issuer deliberately used ethical labelling or marketing with no intention of implementing an ethical investment strategy”. Moneyhub’s Christopher Walsh suggests the “strife” from media makes investing in truly “terrible stuff” less likely for KiwiSaver funds here. (Remember in 2016 when reports revealed some KiwiSaver default funds invested in companies making cluster bombs, mines and nuclear weapons?).

John Berry, CEO and co-founder of Pathfinder, says the organisation’s mission is to “help Kiwis generate individual wealth and collective wellbeing by investing ethically”. Its KiwiSaver plan recently hit 10,000 customers and Berry says New Zealanders “seem to be increasingly focused on the nature of their investments. We think that people are looking for ways to build a future they’re proud of, for the good of future generations, with the realisation that they have a choice to invest in line with their values. We seek to avoid companies that are causing harm, and where possible, seek out companies that positively impact our people, planet and animals.”

The Right Thing to do

Andrew Lance, co-founder of non-profit provider Simplicity, says it uses “negative screening, “excluding sectors from investments. “At a broad level, these are companies with significant involvement (generally five per cent or more of revenue) in sectors like fossil fuels, nuclear power, adult entertainment, weapons, alcohol and tobacco.” Simplicity also excludes companies “deemed to be non-compliant with UN Global Compact principles, such as human rights, labour, environment and anti-corruption”. “We think it’s the right thing to do and believe it will be good for long-term investment returns, too.” It’s not just KiwiSaver to which Kiwis are applying an ethical lens.

Sharesies co-CEO and co-founder Brooke Roberts says the platform saw a 10 per cent increase in the year ended December 2024 of investors with holdings in ethical exchange-traded funds and mutual funds. The value of those investments increased by 30 per cent. “When people are investing, the money they are putting to work shapes our world,” she says in an email statement. She adds that Sharesies has a “responsible filter-in app, which is popular with those looking at exchange traded funds, in particular”.

The site also provides tips for customers “when applying an ethics prism over their investment decision. Ethics are very personal and differ based on people’s values. Like any investment decision, we encourage customers to do their due diligence and research prospects.”

Investing on Instinct

Ethical investor Ben admits he didn’t overanalyse but went with his gut. “I trust in the human spirit of ingenuity and all that to invent new things and to create value, and for the most part – historically – [the shares] have gone up.” But it doesn’t always pay off. Ben has lost a “fair amount of money” on artificial food companies, which, he admits, may tick the carbon footprint ethical box but don’t necessarily get the healthy food gold star. Tobacco is a no-go zone. Weapons feel like a step too far, and while he has invested in gambling in the past, he wouldn’t now.

Does choosing ethics mean sacrificing returns? Moneyhub’s Christopher Walsh says that belief deters some, but “you don’t need to choose between ethics and returns”. He advises switching to a historically high-returning fund, citing Pathfinder’s strong past performance. Morningstar’s September 2024 Kiwisaver report backs this up – Pathfinder’s growth fund’s five-year returns ranked first of 18, with Simplicity’s growth fund placing third.

Ethical investments may also offer stability, says Mindful Money’s Olive Coulson. “These companies are less likely to be taken to court. They’re less likely to have to pay huge reparations from some kind of oil disaster.” Simplicity’s Andrew Lance agrees. Companies that are “governed well, care for the environment and look after their staff will outperform those that don’t”.

But Where to Turn?

Interested in where your funds stand? You’re not alone, says Christopher Walsh of Moneyhub. A few organisations set ethical investment standards, including the UN Principles for Responsible Investment, which promotes environmental, social and corporate governance factors and the Responsible Investment Association Australasia (RIAA), which aligns capital with a sustainable future.

“We were the first KiwiSaver provider to be accredited by the RIAA, which is something we are pretty proud of,” says Booster’s David Copson. Christopher recommends checking individual policies and using the Mindful Money website to assess funds, which helps investors compare options.

“Our world continues to evolve at a fast pace,” says Pathfinder’s John Berry. “We see investors everywhere becoming more in tune with the power they have to make a difference. We hope and anticipate that demand will continue to rise for greater transparency  and more ethical options.” “There’s a lot to be excited about,” adds Christopher. “And it’s moving in the right direction.”