Investing Your KiwiSaver Ethically Is A Powerful Way To Create A Better World, Finance Experts Say

This article originally appeared on Massive Magazine and was written by Vivien Beduya. 

The biggest impact an individual can make for climate and social change is just a click of a button away.

Investing seemed inaccessible for students in the past, but owning a KiwiSaver account actually made you an investor.

Even if your KiwiSaver account only had $1,000, it could change the world.

Barry Coates, founder of MindfulMoney, said that investing in your KiwiSaver ethically is a powerful way to achieve change.

Coates said that KiwiSaver funds alone make up to $90 billion in Aotearoa and were set to grow to $100B by the end of 2022.

A report, From Values to Riches 2022, revealed that 73 per cent of Kiwis expect their investments to be ethical or responsible but people generally do not know where their KiwiSaver is.

The report also showed 78 per cent of Generation Z (18-24) expected responsible investments, the highest amongst the four generations surveyed.

The two main barriers to switching to a responsible or ethical fund were due to lack of independent information and lack of time available for an individual to look at options and compare them.

“The fundamental question to ask is: ‘Where is my money invested?’ Because it will either have good or bad consequences.”

The investment world has facilitated the climate change crisis through providing capital for industries which partake in the burning of fossil fuels.

JP Morgan Chase invested $382B USD ($584B NZD) for new fossil fuel projects between 2016 to 2021, the world’s biggest funder of fossil fuel lending. CitiBank came in second at $285B USD ($436 NZD).

At a desperate cry for climate action, climate scientist Peter Kalmus and other scientists chained themselves to a JP Morgan Chase building in Los Angeles during a climate protest on 6 April.

According to the International Energy Agency, coal accounted for over 40 per cent of the overall growth in global CO2 emissions in 2021, reaching an all-time high of 15.3 billion tonnes.

The government showed support for fossil-free KiwiSaver by banning fossil fuel investments on default KiwiSaver funds.

MindfulMoney Analysis in 2021 revealed a drop from $1.85b to $1.54b of fossil fuel investments in KiwiSaver funds.

Coates said that fund managers would still invest in fossil fuel because of oil companies’ plans to transition into renewable energy, but he remarked that assessing which companies have real follow-through will be tough.

In 2015, Mark Carney, Governor of Bank of England, warned investors about the huge risk of investing in coal, oil and gas becoming unprofitable with the shift to decarbonising the world.

Coates said that it means fossil fuels are grossly overvalued and people are losing money.

The Values to Riches 2022 report also revealed that 48 per cent of Kiwis know what responsible or ethical investing means, a 13 per cent increase from 2020.

“People get it in terms of ethical consumerism as they use their shopping to create a better world. But they can do exactly the same through their investments and it is even more powerful,” Coates said.

He explained as a shareholder of a company, your money can influence company behaviour, impact, and policies.

Pathfinder Asset Management Chief Executive Officer John Berry also shared the same views. He is a fund manager of purely ethical investments.

His focus would not only be avoiding harmful investments, but to invest in companies that will have a positive social and climate impact like water and renewable energy.

He thought it was important for people to find a KiwiSaver provider that matched their values and for providers to keep up with how social issues change over time.

Berry also encouraged other KiwiSaver funds to invest in unlisted and private markets, where there would be options for purposeful companies that build a better world but also generate great profits.

“To give an example, we are invested in a company called Wool-aid, a New Zealand company which developed a biodegradable bandage made of merino wool. All bandages in the world are plastic,” he said.

Pathfinder debunked the low-return myth on ethical investing.

They have been an ethical asset management fund for 10 years but have only started providing KiwiSaver funds in 2019. They grew their KiwiSaver portfolio to $50M in 2020, and to $100M in 2021.

They are the only fund manager to have their conservative, balanced, and growth fund being in the top three of their categories for two calendar years straight since 2019.