Investing your KiwiSaver in an ethical fund is one of the most impactful changes you can make for the planet.
You avoid cosmetics tested on animals and support zero-carbon businesses, but do you know how your KiwiSaver is invested?
You might inadvertently be supporting companies that don’t align with your values. A UK study estimated that investing in a sustainable pension fund can be 21 times more powerful in reducing emissions than other individual actions.
Knowing I didn’t want to fund weapons or fossil fuels, a few years ago I spent a long time looking into the most ethical KiwiSaver option.
I ended up choosing one of Booster’s Socially Responsible Investment (SRI) funds – it wasn’t my perfect choice, but it was better than many others. At the time there were limited options, it was hard to find the information I needed and tricky to figure out exactly where my money was going.
It also seemed as if you had to choose between ethics or good returns.
Luckily, a lot has changed in just a few short years. There are more ethical funds available, information is more easily accessible and research shows that investing responsibly can actually bring better returns.
“The research says that this isn’t something you do as an ethical decision where you are financially disadvantaged, quite the reverse,” explains Barry Coates, founder and CEO of Mindful Money. “What the evidence shows is that if you invest in more sustainable companies, the financial returns tend to be higher.”
Wading through inconsistent information to find answers, as I had done, inspired Barry to launch Mindful Money in 2019. The charity collates information on over 700 KiwiSaver and investment funds to identify the most socially responsible or “mindful”, with Simplicity, Booster’s SRI funds, Amanah, Pathfinder, Mercer and three of Kiwi Wealth’s funds some of the KiwiSaver options deemed most mindful. The online platform was launched after a year of research and planning, but the former Green Party MP says he actually began researching in 1992, when he helped set up the UK’s first ethical investment network.
Mindful Money aims to help people find a fund to match their values, by listing the top investments for each and flagging any companies the fund is invested in which deal in key issues of concern – for example palm oil, fossil fuels, animal testing, weapons, or human rights and environmental violations. It also includes information on fees and past returns, provides options to switch funds, and offers resources such as an ethical investment guide.
By engaging with fund providers on key issues and showing people where their money is actually invested, Mindful Money is helping to create change in the industry. “Things are improving,” says Barry. “We don’t think they’re improving fast enough, of course, but the power of transparency and the power of being able to show people what’s in portfolios really does tend to drive change.”
For example, Mindful Money has tracked the KiwiSaver funds that exclude fossil fuel investments, a number that has gone from 2% in 2019 to 15% this year. Barry says this will continue to rise as people see that fossil fuels are no longer smart investments. “The returns to fossil fuel companies have been shockingly bad. The value of the investments in oil, gas and coal companies has plummeted while the rest of the market has gone up.”
Earlier this year, the charity recognised the positive changes in the industry with the inaugural Mindful Money Awards, where Pathfinder won the title of Best Ethical KiwiSaver Fund Provider. The asset management company launched its KiwiSaver funds in 2019.
As a carbon-negative KiwiSaver provider, Pathfinder invests in low-carbon companies and is currently one of only a few KiwiSaver providers that have no issues of concern listed on the Mindful Money website.
Pathfinder also goes over and above the typical exclusions by investing in projects which make a difference, such as local social housing projects, renewable energy companies and microfinancing for women entrepreneurs in South-East Asia.
“In my mind, simply avoiding harm is not going to change the world,” says Pathfinder CEO John Berry. “Exclusions are a passive approach to investing and won’t inspire anyone or help us find solutions. I wanted a positive KiwiSaver lens to investing ethically, choosing companies on their environmental and social metrics as well as financial. I didn’t see one, so we built it ourselves.”
Pathfinder donates 20% of its management fees to a charity of each member’s choice, and will only invest in a listed New Zealand company that has at least one female board member.
John says his experience since launching Pathfinder’s first ethical fund in 2010 has shown him that investing responsibly is a smart financial decision. “Companies that are strongly governed and score highly on social and environmental metrics are better and more resilient. Their staff will be more engaged, their customers will be more loyal, their brand will be stronger. It makes sense that these companies will be more profitable.”
Find out more about Pathfinder here.