NowNext survey: KiwiSaver managers plan for carbon 'net zero' futures

This article originally featured on Stuff and was written by Rob Stock. 

Nine of the top 10 ​KiwiSaver providers have taken or are considering taking a pledge to be net zero carbon investors by 2050​, and judging by the results of the Stuff’s NowNext survey, they’ll lose investors if they don't.

That’s because almost half of the 10,000 readers who answered the NowNext online, opt-in survey said KiwiSaver schemes’ environmental policies would influence whether they invested with them.

The result mirrored the 2020 survey by the Mindful Money KiwiSaver research agency, which found the same proportion of people - 46 per cent​ – felt it was “important”, or “very important” their KiwiSaver was fossil-fuel free.

Christchurch entrepreneur Helen Townsend​​, co-founder of the Ecosplat sustainable water balloon company, opted for an environmentally, and socially-responsible fund right from KiwiSaver’s get-go.

“I chose a fund based on my personal ethics,” Townsend said.

Her conviction is in contrast to the 31​ per cent of NowNext respondents who said the environmental policies of a KiwiSaver provider were “very unlikely” or “unlikely” to sway their choice.

Townsend chose Superlife's Ethica​ fund, which excludes investments in companies which have an overall negative impact on society, or damage the environment, like oil companies.

“It was basically the only option when I started with KiwiSaver,” she said.

That early stance by Superlife, now owned by NZX, earned the KiwiSaver provider Townsend’s loyalty.

“I haven’t changed it since I set it up,” she said.

She expects all major KiwiSavers to make net zero pledges.

“It's the way the world is going,” Townsend said.

KiwiSaver schemes invest in the shares and bonds of stockmarket-listed companies. These earn their investors a share of those companies’ profits, but associated with that is the moral responsibility for a share of those companies’ carbon emissions.

A net zero pledge is a promise by a fund manager to drive down the carbon emissions associated with their funds, and what they can’t remove, they offset by buying carbon credits.

KiwiSaver providers who have made the net zero pledge so far includes only one of the largest 10 KiwiSaver providers: Westpac/BTNZ ($9.1b in its KiwiSaver funds).

Philip Houghton-Brown, BTNZ’s head of investment solutions, said: “We’re working to align our entire portfolio with our climate objective of a 1.5 degree C pathway, increasing exposure to climate solutions, decreasing climate risks, and supporting ecosystem, biodiversity, pollution prevention and water stewardship.”

“New Zealanders are increasingly vocal about wanting to invest in funds that align with their social and environmental principles,” he said.

Other KiwiSaver providers which have already made pledges are Mercer, Pathfinder and Russell.

Other top 10 KiwiSaver managers with plans to eventually make net zero pledges were Generate ($3.2b​), BNZ ($4.1b​), AMP ($6.7b​), ASB ($14.5b​), Milford ($4.5b​), and Kiwi Wealth ($5.2b​).

ANZ ($19.1b​) was “interested” in making a pledge, and was looking at how it would implement one.

Booster ($2.9b​) said it was evaluating what a net zero pledge would mean for its business.

Some KiwiSaver managers admitted not yet being ready to implement a pledge.

Bruce McLachlan, chief executive of Fisher Funds ($7.4b​), said the company spent significant time engaging with the companies, and its funds had materially lower carbon intensity than the market average.

But, he said Fisher Funds was working to get accurate emissions' data on its funds.

“Once we have completed this work and have greater accuracy in our actual measurements and starting position we will then be able to consider specific carbon and emission commitments,” he said.

Some KiwiSaver managers, who have not taken a pledge, had taken steps towards more sustainable investing.

Blair Vernon, chief executive of AMP Wealth Management, said sustainable investing was embedded into all AMP funds in June, with a focus on reducing the impacts of climate change.

“Our new portfolio has significantly less exposure to carbon emissions.”

But Barry Coates, founder of Mindful Money, said fund managers making net zero pledges were expected to deliver emissions reductions of around 25 per cent by 2025​, and 45-50 per cent by 2030​.

Those that failed to show commitment would lose investors, he predicted.

Large KiwiSaver fund managers would have to start making climate financial disclosures in 2023, Coates said.

It is the latest step in the greening of KiwiSaver following the Government requiring Kiwisaver default providers to go fossil fuel-free.

John Berry, chief executive of sustainable KiwiSaver provider Pathfinder, said investors would have to judge the urgency with which KiwiSaver managers pursued net zero pledges.

“Because there are 29 years to 2050, someone can sign up now, and think I can’t be bothered to do anything. I’ll just make it someone else's problem in five years,” Berry said.

Investors should expect KiwiSaver managers to issue an annual sustainability report to chart their progress.

Foot-dragging KiwiSaver managers would find themselves judged harshly, especially to younger people, who the NowNext survey showed considered climate-friendly investing to be a priority.

“In 2016, you just had to get rid of alcohol, tobacco and controversial weapons, and everyone was happy. I think now people are accepting that exclusions are not enough. You have to be using your money for good,” Berry said.