Kiwisaver: Do you know where your money goes?
Banks lend to all sorts of companies, and the range of concerns that could be included under an ‘ethical’ banner is enormous. Every fund is different from the next, so while some focus on good governance and social responsibility, this may not necessarily mean they are environmentally friendly. What’s right for you depends on your own criteria—and no fund is going to please everybody.
It’s also worth remembering that ethical investments do not cavort around in some idyllic annex of the stock market ruled by peace, love and home-grown vegetables. They fight it out in the same brutal, tooth-and-claw financial battleground as every other investment, and are subject to similar risks. In some relatively new green markets, renewable energies for example, there may be increased risk of business failure while the industries involved find their feet.
The constraints of ethical investing can also reduce the spread of your portfolio. This means your returns are reliant on the performance of fewer companies. This could increase the possibility of larger losses if the entire ‘responsible investment’ sector does badly. In the case of the ABN AMRO Craigs and Asteron funds, investment in only New Zealand and Australian companies could leave you more exposed to potential shocks in those economies.
Ethical Kiwi Fund
Credentials: Supports investments that embrace the principles of ethical business practices. Aims to avoid organisations earning a substantial share of their earnings from tobacco, gambling, alcohol and armament production.
Considerations: Unlike most ethical investment funds, the Ethical Kiwi Fund is a diversified fund, with investments in cash, fixed interest and New Zealand, Australian and international shares selected by Tyndall Investment Management. Classified medium-risk, the fund suits investors with a five- to 15-year timeframe.
Management fees: 0.50%
Socially Responsible Investment Share Fund
Credentials: Invests in a broad selection of companies, with a majority of investments in New Zealand and a portion in Australia, and aims to exclude companies that are principally involved in the tobacco, alcohol, armaments and gambling industries.
Considerations: As this fund invests in shares it is, like most other share funds, classified as a high-risk investment with a recommended minimum investment lasting seven years. Investors must be prepared to accept fluctuations in value from time to time, for the prospect of higher longer-term returns.
Management fees: 1.20%
ABN AMRO Craigs
KiwiSTART Balanced Socially Responsible Investment Portfolio
Credentials: Aims to exclude investments in tobacco, alcohol, gambling, armaments, pornography, nuclear weapons and the nuclear power industry, as well as using publicly available information to exclude investments in companies engaged in poor labour practices, cruelty to animals, or excessive environmental pollution.
Companies will be considered that make a positive social contribution, seek to minimise adverse environmental effects from their operations, have strong governance practices, ethical standards and track records and/or embrace ‘triple bottom line’ reporting.
The managers of the scheme retain the right to invest in companies if it deems the negative effects of the company are outweighed by the positive.
Considerations: This fund aims to reduce risks with a diversified portfolio—that is, it spreads its bets to some extent. If you have more than $50,000 to invest, along with some investment experience, you might consider the personalised option, which allows you to create a customised portfolio based on your own concerns and requirements. Obviously, the risks involved then depend to some extent on your choices.
Management fees: 1.25%
First Choice / ASB
The Global Sustainability Fund
Credentials: Invests in companies that demonstrate sustainable investment practices and policies. The Global Sustainability Fund recognises that environmental, social and governance factors can affect a company’s ability to successfully operate over the long-term.
The underlying investment manager of the fund is Generation Investment Management LLP, co-founded by former US Vice President Al Gore and former global CEO of Goldman Sachs Asset Management David Blood.
Generation adopts the sustainable investment principles developed by the ironically named Blood and Gore.
Considerations: Classified as a high-risk investment. Focuses on shares and property, which means significant fluctuations in returns over the short- to medium-term, and there may be periods of negative returns and the risk of capital losses.
Management fees: 1.50%
Schemes that don’t make the grade (yet)
We checked out the investment statements of the following Kiwisaver providers in May, and found they did not yet meet the new government criteria for taking responsible investing into account, or don’t yet offer an obvious ethical option.
No ethical Kiwisaver option, but at least the bank has committed itself to reducing its environmental footprint (from 2006 levels) by five percent by 30 September 2008 and to becoming carbon neutral by 30 September 2009. It also recently completed its first sustainably designed ‘green branch’ building in Blockhouse Bay.
AXA New Zealand
Through AXA’s charity Hearts in Action the company is involved in community projects and fundraising, and plans to distribute $40 million to charities in New Zealand and Australian over the next 20 years.
The bank with the green logos, the Smartcar and the ‘join the movement’ ad campaign … has so far failed to join this movement. But they say they are working on it.
NZ Association of Credit Unions
Surprisingly, the not-for-profit co-operative has so far failed to take this opportunity to demonstrate solidarity for workers and environmental campaigns overseas.
Other schemes that don’t seem to have gone green
AMP, ANZ Bank, Aon New Zealand, Brook Asset Management, Civic Assurance, EO Financial Services (NZ), First NZ Capital Investment Management, Fisher Funds Management, Forsyth Barr, Gareth Morgan KiwiSaver, Grosvenor Financial Services, Huljich Wealth Management, Industry Retirement & Insurance Services, ING (NZ), Legal & Professional Investment, Medical Assurance Society NZ, New Zealand Harbours Superannuation Plan, NZ Anglican Church Pension Board, Professionals Group Holdings, Real Property KiwiSaver, Smartshares, Southland Building Society, Staples Rodway, SuperLife, Tower, Westpac