Mindful Money: red flags or false flags?

Lily Richards

05 April, 2023

4 minute read

Why are Pathfinder funds showing up with fossil fuel, weapons, human rights and animal testing violations?

Until recently, Pathfinder’s funds returned zero investments of concern on Mindful Money’s Check & Compare tool. But now our funds are flagged as having fossil fuels, weapons, animal testing and human rights violations.
Mindful Money is a charitable organisation founded by former Green MP, Barry Coates.
Their mission is to provide transparency for investors. Using their own categorisation of areas of concern their Check and Compare tool allows the public to review fund holdings that fall into these categories. So, why is Pathfinder, the award-winning ethical investment manager, getting flagged suddenly?

Here's what happened

Mindful Money recently updated their parameters and emailed us with their companies of concern in our portfolio. Our holdings are regularly monitored by our inhouse ESG analyst, but we also welcome KiwiSaver members or third parties (like Mindful Money) bringing investments of concern to our attention. Based on our own research of Mindful Money's list, we either divested (stopped investing) or continued to hold the stock. 
Here’s a list of each company that was flagged, the area of concern it was in, what we decided to do about it and why.

Contact Energy
Area of concern: Electricity generation from fossil fuels.
Decision: We still hold this stock.
Reasoning: More than 85% of Contact Energy’s production is renewable, in fact they’re the largest renewable energy producer in New Zealand. The remaining balance is legacy government owned assets they were saddled with at the time of privatisation.  Contact Energy have a plan to exit these assets and Pathfinder supports companies who are serious about transitioning and who have credible pathways to get there.

National Grid (UK)
Area of concern: Electricity generation from fossil fuels.
Decision: divested (we sold this stock).
Reasoning: We agreed there were better companies in this sector who were showing evidence of positive impact in transitioning into renewables. To be clear, National Grid do not produce electricity themselves, but they produce infrastructure used in the generation of electricity from fossil fuels.

Melrose Industries PLC.
Area of concern: Weapons - produces equipment for fighter aircraft.
Decision: divested (we sold this stock).
Reasoning: This is a holding company, their exposure to certain sectors changes based on what companies they’re holding. New information showed they were breaching our weapons exclusions so we sold the stock.

Barry Callebaut AG
Area of concern: Animal Testing - to sell product (chocolate) into China.
Decision: divested (we sold this stock).
Reasoning: We agreed there were better companies in this sector. Barry Callebaut AG’s recently updated its animal testing policies to specify its involvement in animal testing due to product safety regulatory requirements.

Intertek Group PLC
Area of concern: Animal Testing
Decision: divested (we sold this stock).
Reasoning: Similar to the above, Intertek Group PLC is involved in animal testing due to regulatory requirements for chemicals in their products. We agreed that there are better companies to consider as investment opportunities.

Caterpillar Inc
Area of concern: Human rights violations - civilian equipment manufactured by Caterpillar has been used by the Israeli Government to demolish Palestinian owned homes and buildings on the West Bank.
Decision: We still hold this stock.
Reasoning: We do not believe the decision to use the equipment for the purpose of demolishing Palestinian owned homes was sanctioned by or under the control of Caterpillar.

Activision Blizzard Inc
Area of concern: Human rights violations - discriminatory, offensive and intimidatory workplace practices.
Decision: We still hold this stock.
Reasoning: Activision Blizzard Inc (ATVI) has taken steps to change and improve company culture as well as settling a class action lawsuit brought by the US Equal Employment Opportunity Commission for $18MM which can be claimed by employees who were discriminated against. Pathfinder believes that ATVI has made significant efforts to change corporate culture and has installed real mechanisms to enforce improved behaviour. Pathfinder will review ATVI to ensure it continues to uphold the cultural changes.

If Pathfinder divested so many stocks, why are we still getting flagged?

Mindful Money pull their data from the Disclose website every 6 months, therefore, Pathfinder’s updated data won’t be available on the Mindful Money website until after March 2023, when they pull new data from the Disclose register. Once this happens all Pathfinder funds will be eligible for Animal Cruelty Free and Weapons Free badges.

Not black and white

We stand by our decisions and are always happy to explain why. We appreciate that our world, and what is or isn’t ethical, isn’t always black and white.  Biases can be hard to correct for, and sometimes information can be ‘stale’ despite a company improving its practices. We don’t expect everyone will agree on our ethical investment policy, or our principles. The key focus for us is transparency - at Pathfinder we leave it up to you to decide by sharing as much information about our process as possible.

Lily Richards

With over 10 years of marketing experience in a variety of industries (such as publishing, creative arts and technology), Lily brings an outsider's eye to the financial industries. Overseeing PR, advertising, communications and brand, Lily is passionate about helping Kiwis harness the power of ethical investing to grow wealth and well-being.