Fossil free by default

The government has today taken the right decision to require ethical standards for default KiwiSaver funds, including exclusion of fossil fuels. This protects the interests of those who do not make a specific choice of funds when they sign up to KiwiSaver. The government has a responsibility to ensure their money is not invested in fossil fuels and other companies that cause social and environmental harm.

Barry Coates, founder and CEO of Mindful Money commented: “Annual surveys undertaken by Colmar Brunton show that three quarters of New Zealanders do not want their funds to invest in fossil fuels. This policy aligns with public values, as well as government policy.”

This policy is an important building block in government support for sustainable finance. Climate action needs money to be directed away from fossil fuels towards clean energy and climate solutions. Through this policy, the New Zealand government is joining with financial institutions around the world that have divested over $12 trillion funding from fossil fuels.

Barry Coates: “Avoiding fossil fuels is not only good for climate stability, it is also a good financial decision. The world cannot burn all the fossil fuel reserves without catastrophic climate impacts, and producers will be left with worthless ‘stranded’ assets. This is a serious risk to the world’s financial system as well as to investors. Excluding fossil fuel producers from default Kiwisaver funds is a good financial decision.”

Research by Mindful Money shows that $1.6 billion of KiwiSaver funds are invested in companies that are engaged in fossil fuel production. Only 2% of Kiwisaver investments are in funds that have a policy of excluding fossil fuels. Survey data shows the barriers to investment include a lack of transparency and a lack of objective analysis to compare options. Mindful Money was established to overcome these barriers.

Barry Coates: “As well as adopting minimum standards on excluding investments in fossil fuels and weapons, future default KiwiSaver providers will need to be transparent about their ethical standards. However, this is also important to all 3 million KiwiSaver investors. Minimum standards, transparency and reporting on ethical investment should be applied to the whole KiwiSaver scheme.”

Mindful Money undertook research on ethical investment to inform the review of default funds, made a submission, provided further information and encouraged submissions from the public. This is part of advocacy work on retirement policy (included in the recent report from the Retirement Commissioner), the FMA inquiry on ethical greenwashing and the Sustainable Finance Forum.

Individuals can find out how much their KiwiSaver fund invests in fossil fuels and weapons by visiting www.mindfulmoney.nz. They will be surprised to find that $4.7 billion is invested in sectors that most New Zealanders want to avoid. Mindful Money’s fund finder tool is a quick, easy and free way for anyone to find a more Mindful fund that meets their criteria.