OPINION: KiwiSaver now has $70 billion of our savings. As owners, we should focus on the wider impact of this massive savings pool.
KiwiSaver can be a huge positive for us individually and, believe it or not, also for our planet. We expect good investment returns, and that is critically important. As a manager of a KiwiSaver scheme that is my first obligation – to help our members get the best possible returns.
But there’s another important dimension.
In our daily lives, many of us are conscious consumers. We make active choices about where we spend our money, and increasingly we are making choices based on ethical considerations.
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 put pressure on companies to change their behaviour.
Investing is no different. How we choose to invest our money makes a real impact.
Close to $20 trillion is invested around the world in low carbon intensity funds. This starves the worst climate change enabling companies of low-cost capital and forces them to change if they want to remain a destination for investment capital.
Your KiwiSaver should also invest positively. There are innovative new investments that are making a massive social impact, while still being sound financially.
For example, Pathfinder has recently invested in the Women’s Livelihood Bond, a security that is raising capital to lend to small community-based businesses across Asia.
Funds from this bond will be loaned to micro-finance initiatives that will help more than 180,000 financially underserved women in Cambodia, the Philippines and India.
This initiative was founded by Professor Durreen Shahnaz, a Bangladeshi-American academic and entrepreneur wanting to provide women, the environment and underserved communities with a voice in global markets.
From a community perspective, this micro-finance lending can make a massive difference. Small cash loans are made to individual entrepreneurs and small businesses, especially targeting women who use the funds as a tool to raise their families out of poverty. This delivers skills, financial resilience, and the ability to generate income.
From an investment perspective, micro-finance organisations have an amazing record of repaying investors. Interestingly, women-targeted micro-finance institutions tend to be associated with lower levels of risk and fewer write-offs.
Financial markets offer literally thousands of investment opportunities, so KiwiSaver managers don’t have to invest in “bad” companies.
Check out websites like Mindful Money to see what poorly behaving companies your KiwiSaver invests in.
You’ll also find that taking responsible investing seriously does not mean lower KiwiSaver returns. You can do good and do well.
This is no surprise. When companies treat consumers, staff, the environment and other stakeholders well, they consider more than just traditional financial risks. This wider view makes them more resilient and lower risk as an investment, which makes sense. For instance, you’d expect companies that treat their employees better will have more engaged and productive staff.
In the same way many of us are conscious consumers, it is time to also become a conscious investor. Use your voice and your savings to align your investments with your values.
Make sure your KiwiSaver is having an impact.
Paul Brownsey is co-founder of ethical investment manager Pathfinder Asset Management, and ethical KiwiSaver provider CareSaver. For 2020 Pathfinder was named Responsible Investment Manager of the Year by Goodreturns/Research IP and Social Impactor of the Year by the Sustainable Business Network. Disclosure of interest – CareSaver KiwiSaver has invested in the Women’s Livelihood Bond.