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What is a Mindful Fund?
17th Oct. 2024
The lack of clear standards for responsible or ethical investing has led to a troubling trend of exaggeration and misleading claims. It is unsurprising that our annual surveys consistently show more than half of the public worrying about 'greenwashing'.
That's why we've developed the Mindful Funds criteria. Our aim is to set a higher bar for ethical investing and ensure funds back up their marketing claims with concrete action.
Mindful Money brings radical transparency to retail investing in New Zealand. The Fund Checker enables any investor to look up New Zealand funds and understand what companies they invest in, categorised by the issues that the public wants to avoid.
Those who want to choose a more ethical KiwiSaver or investment fund can use the Fund Finder which shows a list of funds that most closely match an investor's criteria. The list of funds is drawn from the category of Mindful Funds - those that meet our criteria for ethical investing.
Strategies to achieve change
The criteria for Mindful Funds are drawn from the main strategies for investing ethically. The key ways that any fund provider can align with consumers’ ethical preferences and raise ethical standards are to:
- Avoid investments that cause harm to people, the climate and the environment
- Actively engage with companies to raise social and environmental standards
- Invest in companies that generate positive social and environmental impacts
These three strategies form the core of Mindful Funds criteria together with the fund provider ‘walking the talk’ by:
- Promoting ethical investment in advocacy and communications, embodying ethical practices as an organisation, and taking climate action.
Mindful Fund criteria
The funds applying to become Mindful Funds are required to submit an application. This asks for specific measures of the degree to which the criteria are met. The emphasis is on objective evidence of action, rather than descriptions of internal processes.
- Avoiding Harm: Most funds in New Zealand have Ethical or Responsible Investment policies and claim to use tools such as Environmental. Social and Governance (ESG) factors in their investment. But an analysis of their portfolios often reveals a different reality. A significant portion of the portfolio of many funds is invested in companies that cause harm. Mindful Money’s criteria on avoiding harm starts with the characteristics of actual investments, not the statements of policy or intention.
- Active Ownership: Fund providers may use stewardship and engagement to influence companies they invest in. Fund providers may vote on AGM resolutions. They may also engage with the company by asking questions and pushing for specific changes with executives via emails, in person or as part of an investor coalition. Academic studies show stewardship can be effective, particularly for governance questions. However, it is harder to find evidence for success on major environmental issues. Mindful Money’s analysis of the high profile case of Exxon-Mobil shows why it often fails. Although companies with fossil fuel business models are prepared to make minor improvements, strong short-term profit incentives mean they resist deep change. Applications for Mindful Fund include assessment of the effectiveness of stewardship engagement in addressing the real-world impacts of company investments on people and the environment.
- Positive Impact: Evidence is also required to show positive social and environmental impact. Many investment providers claim positive impact if the company they invest in is related to one of the Sustainable Development Goals (SDGs), such as a water company related to SDG6. But in the past, water privatisation has often resulted in higher charges, poor quality water, pollution and a lack of investment. Applicants for Mindful Funds need to show that their investments contribute to specific SDG targets such as safe and affordable drinking water for people who currently lack access.
- Ethical Practices: On the final criterion, demonstrating ethical practices, applicants need to provide evidence of their practices, including on issues such as transparency, diversity and inclusion, communications with members and policy-makers, climate actions and charitable donations. The assessment will take account of memberships and certifications, but the emphasis for MIndful Funds is on tangible evidence of good practices.
Assessment Process
A review of applications is undertaken by Mindful Money staff and recommendations provided to the Mindful Money Investment Committee. There may be a process of dialogue with the applicant to provide more detail or context. Most funds are stronger in one category than others and the Committee makes a judgement on the overall performance of an applicant fund against the criteria as a whole. The Committee generally meets quarterly.
The investment providers with designated Mindful Funds make a contribution to Mindful Money’s analysis and website costs. These are kept to a relatively low level to ensure the participation of all the funds that meet the Mindful Funds criteria.
Mindful Money undertakes regular reviews of the designated Mindful Funds and monitors any change in their portfolios, policies and practices. There are periodic reviews of the criteria for Mindful Funds. As an example, a specific set of criteria for funds investing in commercial property were developed in 2024.
Additional detail on how Mindful Funds fit within Mindful Money’s approach to ethical investment are included in the website section on Methodology.
How Do You Know if a Fund Is a Mindful Fund?
You can find a full list of Mindful KiwiSaver funds here.
You can find a full list of Mindful Investment funds here.
Wanting to find a Mindful Fund that fits your values?
Answer three questions and our Mindful Fund Finder will provide you with the fund suggestions that most closely match your values and investment criteria.
Mindful Funds can also use our badge, so look for this symbol when on other fund websites.
