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Your KiwiSaver, your values

"Every KiwiSaver provider must take values into account with their investment decisions," writes John Berry.

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Recently a top five KiwiSaver provider rebranded, explaining it was now putting sustainability at the core of its investing. Brilliant, they’re listening to their customers and pivoting to be more future-focused with their investing.

Several years ago another KiwiSaver provider stated clearly on its website that it didn’t consider responsible investing factors in its investment decisions. It now embraces environmental, social and governance (ESG) factors when choosing companies.

Again, this major shift recognises how our world and investor expectations have changed over recent years.

The head of investment from another top five KiwiSaver provider a few years ago noted at an industry conference that they were fine talking about ‘responsible investing’ but did not want to use the phrase ‘ethical investing’ because it implied values and beliefs were being taken into account.

That thinking is now outdated and obsolete. Every KiwiSaver provider must take values into account with their investment decisions – even if only to acknowledge they set the bar on the lowest rung by simply avoiding investing in things that are illegal.

Not everyone thinks investors should concern themselves with harm caused by companies in their portfolio. It’s legal to invest in tobacco companies. Spoiler alert for these investors, tobacco stocks have made bad investments. Share prices of global tobacco companies British American Tobacco and Imperial Brands are both down on where they were 10 years ago, the share price of Philip Morris is almost exactly the same as five years ago. The rest of the market has gone up a lot in the meantime.

Not everyone thinks investors should concern themselves with the carbon footprint or fossil fuel dependency of a company’s products. It’s legal to invest in coal companies. Again, spoiler alert for these investors, coal companies have made bad investments. Share prices of coal producers BHP and Whitehaven Coal are currently both lower than 10 years ago.

If a KiwiSaver fund invests in any of these coal or tobacco companies they are taking a value set into account. Their values are guided by investing in anything legal that they think will make money. Investors need to know that.

Factory farms, fossil fuels, firearms and alcopops marketed to our youth are all entirely legal to invest in. But just because it is legal doesn’t mean you have to invest in them.

Now with transparency from websites like MindfulMoney.co.nz investors can all find a KiwiSaver aligning with their personal values. You might want to invest in whatever is legal, avoid fossil fuels or focus on high ESG companies. You can.

KiwiSavers are managed funds meaning the savings of thousands of investors are pooled together into one portfolio. But as it is only a single portfolio, it can only have one value set overlayed. Given these value sets differ from one provider to the next it’s helpful that there are now around 30 KiwiSaver providers. Investors have choice.

There are many considerations you can use for choosing a KiwiSaver provider, like active or passive management, returns after fees, service levels, the people behind it and ethics that are important to you personally.

Your KiwiSaver, your savings, make sure it’s also your values.

– John Berry is co-founder and chief executive of ethical fund manager and KiwiSaver provider Pathfinder Asset Management, the first B Corp certified fund manager in New Zealand which is part of Alvarium Wealth

(This article was originally published by Stuff  December 9, 2021)

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