When Investments can Yield More Than Just Financial Gains

21st March 2024

When it comes to investing, most of us focus on the returns - the bottom line on our KiwiSaver statements. But a growing number of Kiwis are realising that our investments can yield more than just financial gains.

Originally published on Informed Investor

By putting our money where our values are, we can help shape a better world. And the good news is our voices are starting to be heard. What’s more, investing ethically doesn’t mean sacrificing returns. In fact, there’s growing evidence that aligning our investments with positive social and environmental outcomes can actually lead to better long-term financial performance.

It’s a win-win: we can shape the world we want to see, while also securing our financial futures.

Look at what happened after Russia brutally invaded Ukraine. Within days of the invasion, Mindful Money revealed that KiwiSaver funds had over $100 million invested in Russian companies and the Russian government. Kiwis were quick to express their outrage, and the response from fund managers was swift. Within days almost all of that $100 million had been divested.

It was a powerful demonstration of how quickly change can happen when investors demand it.

Now, new analysis reveals that over the past six months, KiwiSaver fund managers have made significant strides in reducing investments in companies that cause harm more broadly. Investments in tobacco have plunged by 72 per cent; weapons by 35 per cent; gambling 29 per cent; and animal cruelty by 25 per cent. This represents the biggest shift towards ethical investing since public transparency of KiwiSaver holdings began five years ago.

What’s driving this change?

In large part, it’s the power of consumer demand. Surveys show New Zealanders are increasingly concerned about the impact of their investments. They don’t want their hard-earned money supporting industries that undermine their values, whether it’s human rights abuses, environmental destruction, or the promotion of harmful products like tobacco and weapons.

Kiwis are increasingly aware of where their KiwiSaver money is invested and are taking action. They’re contacting their providers, switching to ethical funds, and demanding better investment practices.

Providers are starting to listen, with even the largest KiwiSaver funds significantly reducing their holdings in harmful industries over the past six months. This shift demonstrates the power of informed consumers voicing their expectations.

But while this progress is heartening, there’s still a long way to go. Despite recent progress, nearly $8 billion of KiwiSaver money is still invested in companies that conflict with many of our values. Even more alarming is the record high of $3.29 billion invested in fossil fuel companies in 2023, despite the worsening impacts of climate change and evidence indicating that fossil fuel investments yield poor returns.

Over $120 million of KiwiSaver money is invested in companies that are operating illegally in occupied Palestine. This is despite the New Zealand government’s stance that the settlements violate international law. As Kiwis, we pride ourselves on being responsible global citizens. We should be ensuring our money isn’t undermining that commitment.

The tide is beginning to turn, but it will take continued pressure from all of us to make ethical investing the norm rather than the exception. The more we demand transparency about where our money is going, and the more we vote with our wallets for KiwiSaver providers and funds that align with our values, the faster this change will happen.

Ultimately, this isn’t just about avoiding harm; it’s about actively investing in a better future. Many Kiwis are eager to see their money supporting companies and projects that are making a positive difference, from renewable energy to affordable housing and healthcare. Some KiwiSaver providers are starting to offer options in this space, but there’s significant room for growth.

The potential for change is immense, with our KiwiSaver accounts collectively representing over $100 billion. By aligning this capital with our values, we can drive the transition to a cleaner economy, support thriving communities, and create a brighter future for generations to come. Imagine the impact of investing in renewable energy, affordable housing, and healthcare ... all while securing financial returns.

The power to shape a more sustainable and equitable Aotearoa for the next generation is in our hands.

Of course, moving the needle on entrenched investment practices won’t be easy. It will require sustained effort and advocacy from all of us. But the past six months have shown that when Kiwis speak up, the investment industry listens.

Our voices matter. Our choices matter. Money may make the world go round, but we get to decide which direction it spins in. Let’s make sure it’s towards the future we all want to see.

What You Can Do as an Investor

Here are some simple steps you can take to ensure your investments are aligned with your values and contributing to a better world:

1. Check Your Investments: Take a look at your KiwiSaver or managed fund to see exactly which companies you’re invested in. It’s quick, easy and free.

2. Speak Up: Don’t be afraid to voice your concerns and preferences to your fund manager. The more investors speak up about what matters to them, the more fund managers will take notice.

3. Choose Wisely: If you find that your current fund doesn’t match your values, consider switching to one that does. You can find a KiwiSaver fund or investment fund that fits your values through our Fund Finder tool.

4. Spread the Word: Share what you’ve learned with friends and family. Many people are unaware of where their money is being invested and the impact it could be having.