Advice matters
Like to invest responsibly with your KiwiSaver?

When it comes to making decisions about KiwiSaver investments, most people are familiar with the need to choose a fund that fits their risk profile. You might also have spent some time thinking about which provider is appropriate for your needs.

But have you thought about ensuring your KiwiSaver fund is aligned with your personal values?

Rise of responsible investing

There has been a surge of interest in socially responsible investment in recent years. It’s sometimes also referred to as ethical investment. Very broadly, this means investing money in line with a person’s beliefs.

Maybe you want your money to go towards businesses that are helping the world move away from its reliance on fossil fuels. Or perhaps you don’t want your money to be invested in businesses where there are questions about worker exploitation.

Responsible investment is designed to align those wishes to where your money goes.

The most recent report from the Responsible Investment Association of Australasia showed that the amount of money in sustainably themed investments in New Zealand had doubled to $40 billion last year. The responsible investment market as a whole reached $179b. There are now a number of KiwiSaver providers that explicitly state their socially responsible investment credentials for their funds.

Selection or screening

Managers who offer socially responsible investment can do it in a number of ways.

One of the most common methods is screening – that is, they do not invest in a certain subset of companies. That could be those that are involved in significantly carbon emitting activities or fossil fuels, weapons manufacturing, companies that promote gambling or pornography, or tobacco.

Another approach is to specifically seek out the type of companies that the manager believes its investors want to support and invest into those.

What about the returns?

Research has shown that socially responsible investing does not need to have a negative impact on an investor’s returns. In fact, some argue that investment managers who use an environmental, social and governance lens (ESG) when they make their investment decisions are better set for the future, because they potentially avoid some future risks. Chris Terzis of Morningstar Sustainalytics, has been quoted as saying people who are not considering ESG in their decision-making might not pick up on risks that other investors did.

How to do it

There are a number of fund managers, including KiwiSaver providers, in New Zealand that offer responsible investment options. There are sustainable funds that invest in things like renewable energy and water infrastructure, and those that screen for investments’ greenhouse gas intensity.

If you know the sorts of investments you most want to be making with your money – or the ones you really don’t – you can survey the landscape of KiwiSaver funds to find an appropriate fit.

Responsible investing is becoming so mainstream now that even some providers that do not explicitly advertise their funds as such are more often than not applying some of the screens that you might consider important. If you’re wondering what your fund is investing in, you can check its disclosure statements for the main holdings and to delve into the approach being taken.

Like to know more?

If you have questions about socially responsible investing, we can help. Give us a call or an email and we will help you explore your KiwiSaver options and what could be a good fit for your investing goals and circumstances – as well as your ethical investing views.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.