OPINION: Last week Jacinda Ardern’s bank KiwiSaver was found to invest in weapons companies supplying the Saudi Arabian military.
A week earlier the financial services regulator the Financial Markets Authority (FMA) made it clear it has had enough of fund managers promoting green investment products where the green merits can be questionable.
We’ve reached a critical point where consumers and the regulator are awake to companies labelling product to meet demand, but not necessarily being true to that label.
In fact, the FMA has gone further, intimating there needs to be authenticity within the fund manager’s business to align with the green investment product on offer.
Mindful Money is a charity whose website drills down into KiwiSaver funds to identify unethical investments. Its founder, Barry Coates, has long recognised greenwashing in financial services as an issue.
Consumers need to know that just because a fund is called ‘responsible’ or ‘impact’ doesn’t mean it is.
In one stunning exhibition of greenwashing a fund launched by a bank in 2019 claiming green credentials like clean energy, environmental projects, affordable housing and clean water was shown in Mindful Money’s analysis to have more unethical investments than the same bank’s equivalent fund that did not claim to be green.
Being able to drill down into where KiwiSaver providers invest can be an eye-opener.
While the website of Ardern’s KiwiSaver provider says “you can be confident your money is being invested responsibly”, Mindful Money identifies 15 per cent of its growth fund comprising exposures to fossil fuels, weapons, gambling, alcohol, GMOs, animal testing, human rights issues and environmental violations.
Surveys from Mindful Money and the Responsible Investment Association of Australasia are pretty clear on what ethical issues Kiwis care about.
Can you explicitly take account of environmental issues like climate change and at the same time invest in 24 fossil fuel companies?
As the FMA notes, it’s not just about product. A fund manager should make it clear whether they believe in the ethics or sustainability they are promoting.
Is it consistent to promote clean energy in a KiwiSaver and at the same time lend significant amounts to coal or oil projects?
The authenticity of businesses generally is coming into focus for consumers. Many see the purpose of business as promoting interests of customers, suppliers, communities, staff and shareholders, not simply maximising short term profits for shareholders.
Back in 2016 investors were aghast to find there was a good chance they had companies linked to cluster munitions, nuclear weapons and land mines in their KiwiSaver.
There were questions about whether it was legal to hold these investments and large KiwiSaver providers were shocked into action.
Simply avoiding these nasties does not necessarily make an offering ethical or responsible. Increasingly investors are expecting a positive lens of actively investing in companies providing environmental or social benefits, as well as decent profits.
KiwiSaver is a significant retirement asset, maximising returns is critical. Most people would be on board with the aspirational goal of saving the planet, but not if it costs in terms of financial returns.
According to Morningstar, over 2020 there were ethical KiwiSaver funds in the top two performers across each of the conservative, balanced and growth fund categories.
In one category ethical funds held both the number one and number two spot. Gone are the days of investing ethically costing in terms of returns.
When it comes to sustainable spending or investing consumers are savvy and want to be treated fairly. The FMA as regulator is on board as well.
For investment products we’ve just passed the point of peak greenwashing.
John Berry is co-founder and CEO of ethical KiwiSaver provider CareSaver and ethical investment manager Pathfinder Asset Management.