Tuesday 25 October 2011

How Green Is Your KiwiSaver?

QUESTION: I have never felt comfortable with investment markets so I haven’t joined KiwiSaver.  I have been reading your column about the benefits of KiwiSaver and am having second thoughts.  Are there any socially responsible KiwiSaver funds available?

Answer:  Socially responsible investments have become more popular over the past 10 years with the increase in awareness of environmental and ethical issues.  Many leading fund managers in New Zealand are taking social responsibility more seriously, and apply a ‘green filter’ to the investment choices for their funds. 

You can go more green than this.  There are six socially responsible (or ethical) KiwiSaver funds listed on the website www.interest.co.nz.  You can find their investment statements online and read up on how and where they invest.  If you would like to discuss your options with someone, talk to an Authorised Financial Adviser. 

A socially responsible KiwiSaver fund will generally use a negative screening process to avoid investing in companies involved in weapons manufacture and sales, gambling, tobacco, the fur trade, pornography, cosmetics involving animal testing, and nuclear energy.  They may also screen out companies operating in countries known for human rights abuses including North Korea, Iran, Myanmar and parts of China including the Xinjiang and Tibetan regions; countries that support commercial whaling, and any country known to be developing weapons of mass destruction. 

Some socially responsible funds will apply the negative screen above but also go further with a positive screen.  They will invest only in companies that are making a positive contribution to environmental, social, humanitarian and sustainability issues.  For example, this positive screening process may allow investment in certain agricultural and forestry activities, products that reduce environmental damage, and renewable energy technologies.  They will also look for companies with good employment practices, effective anti-corruption controls, good environmental management and transparent communication.

Any KiwiSaver socially responsible fund will probably have a component of fixed interest and this may be invested in government bonds within the OECD, but not in undemocratic regimes or countries with a high degree of corruption. 

The jury is out as to whether socially responsible funds perform better or worse than mainstream funds, so don’t invest with the expectation that your fund will outperform all other funds.  A fund manager with an open mandate may be free to invest, say, in uranium mining if that sector is likely to outperform.  Your socially responsible fund has a smaller field of investments to choose from, so it may under perform at times and may also be more volatile. 

By now you will have realised that there is a lot involved in selecting a socially responsible or ethical investment.  You will need to do your homework and select the fund that you feel best matches your ethical convictions, while meeting your investment objectives as well.

As published in the Hawkes Bay Today 25 October 2011


Shelley Hanna is an authorised financial adviser FSP12241.  Her disclosure statement is available on request and free of charge by calling 8703838.  The information contained in this article is of a general nature and is not intended to provide specific or personalised advice.  If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.

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