The Hidden Impact of Your KiwiSaver Fund
Investment has consequences in the real world and our money choices do matter, writes Olive Coulson, of Mindful Money.
24 October 2023
Navigating the ins and outs of our KiwiSaver often involves thinking about returns, fees and risks, but there’s another critical dimension: the impact your money has on the world.
Most Kiwis are aware of the ways their purchases have an impact on climate change, the environment, or people.
Not buying factory-farmed eggs or cosmetics tested on animals. Choosing fair trade, less carbon-intensive or lower waste products. Walking more and driving less. These are all small changes in our lives that collectively make a difference to our impact on the climate, people and the planet, and just as importantly, put pressure on companies to change their behaviour.
Investing is no different. Investment has consequences in the real world. How we choose to invest our money makes a real impact.
What are our KiwiSaver funds supporting?
Your KiwiSaver fund is invested mainly in shares of public companies. These companies can have very different impacts on the health of our climate and the well-being of our society.
As of March 2023, our collective KiwiSaver funds are supporting the following types of companies that most New Zealanders want to avoid (shown in annual surveys):
- Fossil fuels: $3.2 billion is invested in the fossil fuel sector. While some oil and gas companies are genuine about their transition plans towards renewable energy, most KiwiSaver investment goes into companies that are investing in more oil and gas production.
- Animal cruelty: $2 billion is invested in companies associated with animal cruelty, including products tested on animals, factory farming, and fur.
- Human Rights abuses: $1.4 billion is invested in companies linked to human rights violations, such as mining companies harming communities and sweatshop factories harming workers.
- Social harm: KiwiSaver funds have over $1 billion invested in sectors such as alcohol, pornography, gambling and tobacco.
- Weapons: About $292 million is associated with weapons manufacturers, including firms that produce nuclear armaments.
KiwiSaver and your carbon footprint
When most people consider their carbon footprint, they think about their electricity use, travel by car, or the food they eat. These impacts add up to around 7.7 tonnes of carbon dioxide equivalent for each New Zealander.
Few people think about the climate footprint of their KiwiSaver fund or their other investments, yet they are equally important. Your KiwiSaver invests mainly in companies, and these companies in turn have very different impacts on the climate.
For example, an average KiwiSaver fund invested in global shares has a footprint of around 2.3 tonnes of Co2 equivalent. That’s larger than most other elements of an individual’s carbon footprint.
So, what can you do?
Understanding where your money goes is the first step. Mindful Money, an independent charity, has done the research so you don’t have to. You can use their fund checker tool, which will show you what companies your KiwiSaver or investment funds are supporting.
If your current investment doesn’t align with your values, consider making a switch; it’s quick, easy and free.
Choosing a fund that suits you
Choosing a fund that aligns with your values doesn’t have to be complex. Mindful Money has created a simple tool to guide you, the Mindful Ethical Fund Finder.
The Fund Finder will ask you three questions:
- What do you want to avoid investing in?
- What investment approach is important to you?
Avoiding bad companies,
Using your money to engage with bad companies to make them better,
Higher past returns
- What is your risk profile?
Switching your KiwiSaver or other investment funds can be a straightforward process that takes less than 15 minutes.
Will I have to sacrifice returns?
By pulling investments away from the worst climate wreckers, we not only prioritise our planet’s health but also shield our finances from climate risk and the inevitable decline in fossil fuel energy. Historical data shows investors in fossil fuels have had far lower returns than the market average over the past decade.
Long-term studies show that, on average, responsible investing earns as much or more than conventional investing with lower risks.
Your KiwiSaver is more than a retirement nest egg; it’s an instrument of change, capable of influencing our collective tomorrow.
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