Use your KiwiSaver to take action on climate change

The latest research shows that more New Zealand investment is piling into the worst companies. Mindful Money’s analysis of all 398 KiwiSaver funds shows there has been a surge of 20% in investment over the past six months into the worst global companies, totalling $1.7 billion.

Those companies, including giants such as Exxon Mobil, Chevron, Shell and BP have been promising to transition to renewable energy for over 30 years, since the climate change convention was signed. Their promises have proved to be greenwash. The UN Secretary-General António Guterres has accused the fossil fuel industry of spending billions of dollars in deceiving the public.

Instead, the worst fossil fuel companies are continuing to invest in producing more coal, oil and gas instead of transitioning to renewable energy. Many of those companies are also funding climate deniers and lobbying the Trump government and others to remove restrictions on new drilling. 

You don’t have to invest in the companies wrecking our climate. You can choose a climate friendly fund.   

Switching to a climate friendly fund does not mean lower returns. In fact, this is one of those situations where you can find the sweet spot of earning better financial returns as well as better outcomes for the climate. A 10 year comparison shows that returns from oil and gas have lagged far behind the market average. There was a short term rise in fossil fuel share prices after Russia invaded Ukraine, but subsequently prices and returns have levelled off and under-performance worsened compared to the average.

This is echoed in analysis by the Institute for Energy Economics and Financial Analysis that shows that the fossil fuel sector has delivered the lowest performance and highest volatility of any sector over the decade. On average, the returns from your KiwiSaver and investment funds would have been higher if investors had avoided fossil fuel investments. Bad for the climate, bad for your savings.

We should not be surprised. Experts, led by Mark Carney, former Governor of the Bank of England, have repeatedly warned about the prospect of ‘stranded assets’ – the coal, oil and gas reserves that will be almost worthless when fossil fuel use declines. 

It is no wonder that the Reserve Bank and other central bankers are worried about climate change – the scale of stranded assets dwarfs the housing assets at risk in the Global Financial Crisis.

One reason for continued investment in fossil fuels is that investment managers have relied on the theory of ‘efficient markets’ (ie. share prices reflect all available information) to guide their investment choices. This leads to many KiwiSaver funds investing in indexes that cover the whole market or in a broad range of sectors that includes fossil fuels. 

But on issues of climate change and environmental damage, markets aren’t always right. As the eminent economist, Sir Nicholas Stern observed, climate change is the world’s greatest ever market failure. The adverse impacts of fossil fuels production and use result in risks that are not reflected in market prices.  

Many fund managers realise this, and use analysis of Environmental, Social and Governance (ESG) risk to manage their investments. Most fund managers in New Zealand now claim to use ESG management, but even so, many of them still invest in fossil fuels, including the worst companies that are still expanding their production. 

Mindful Money has done an analysis of all KiwiSaver funds and identified that fund providers that invest most in the worst companies as a proportion of their portfolio. They are: 

• Milford
• Quay Street
• Kernel
• Select
• Summer
• Smart

Not all of the funds in the above providers have high proportions of the worst fossil fuel companies. The funds focused on Australian resource companies, such as Santos and Woodside are high.  Funds focused on NZ have low proportions as no listed NZ companies are involved in fossil fuel expansion. In addition, some of the above fund providers have specific funds that avoid most of the worst fossil fuel producers. These include the Quay Street SRI fund, Kernel Clean Energy, Kernel Kensho EV Innovation, and the SuperLife Ethica fund.

It is free, quick and easy to find out where your KiwiSaver is invested. Go to www.mindfulmoney.nz and type in your KiwiSaver or investment fund name into the Fund Checker. Prepare for a surprise. The most common reaction we hear is: “OMG. I didn’t sign up for this.”

Then you can find a fund that aligns with your values.

Use the Mindful Money Fund Finder or go straight to the list of climate friendly funds. The fund providers or range of funds that are climate friendly include Always Ethical (AE), Betashares Sustainable Leaders, Pathfinder and TAHITO. 

Choose a fund that is free from the worst fossil fuel companies. Your investment choices matter. Feel good about your investments, do good for the climate and earn good returns.