Ethical KiwiSaver Investment Options

What is an ethical KiwiSaver? Is it worth investing your funds to them?

Are you one of the three million Kiwis who grow their money through a KiwiSaver scheme? It’s an easy investment method because you can simply entrust fund managers to invest your money in different companies on your behalf. You can simply wait for the returns in your pocket.

This process is all quick and easy, but do you know exactly where your money is invested? Without your knowledge, it may be invested in a weapons company that manufactures landmines or cluster bombs. While it sounds lucrative, it's worth asking if it's aligned with your values. Further, will this investment scheme hold out for the long-term?

That’s why ethical KiwiSaver investment is becoming more popular. What does it mean exactly, though? What’s the line between ethical and unethical? Here’s a quick overview.

What is ethical KiwiSaver?

Ethical is a broad term, and its meaning can vary depending on the person. As an umbrella term, ethical investing means your money is grown in a socially responsible company. This means the company only engages in clean business practices and doesn't cause harm to people or the environment.

Still, this is a vague definition. There’s really not a clear borderline on which to consider ethical or unethical. Some may view investing in tobacco, alcohol, nuclear power, or gambling companies as ethical. Consequently, some may view it as the opposite.

For KiwiSaver providers, they determine which companies are socially responsible through a series of positive and negative screening. This is how providers conclude which companies can get ethical or sustainable status.

What is KiwiSaver positive and negative screening process?

KiwiSaver providers use a series of positive and negative screening to determine which companies are ethical. Negative screening filters out companies or businesses that may cause harm to the society or the environment. This can be categorised to weaponry, fossil fuel exploration, nuclear power, and animal testing companies.

On the other hand, positive screening includes companies and industries that benefit society or the environment. This also includes businesses that have a great potential to contribute to the greater good of the planet.

Although companies go through these screening processes, the line between negative and positive also isn’t as clear. There have been several reports, where companies market themselves as positive, but they’re actually negative. It’s essential to take note of this whenever your money is invested through your KiwiSaver scheme.

Will my KiwiSaver ROIs be affected if I invest ethically?

It’s good to invest in companies with great causes, but not if it’s affecting your returns of investment negatively. While it may vary greatly depending on investment type, company, and time of the year, studies show that KiwiSaver schemes that were invested in ethical companies outperformed other investment funds.

Data during the first quarter of 2020 shows promising results for KiwiSaver sole investments in ethical companies amidst the COVID-19 outbreak. Ethically invested growth funds were down only by 8%, while ‘unethical’ growth funds invested were down by 12%. This is also true for conservative and balanced funds.

What are the best ethical KiwiSaver investment options?

As discussed above, the KiwiSaver definition of ethical tend to vary, so every scheme may be different. Generally, these providers below are known to invest only in well-known ethical companies. As the definition of ethical ultimately depends on you, it’s important to also conduct your own research and dig deeper to see if the companies align with your values.

AMP

AMP’s responsible investment balanced fund doesn’t invest in companies that can cause substantial social impact. They lean towards investing in companies that contribute to the betterment of the environment, human rights, animal welfare, and gender diversity, among other causes.

Fund: Balanced
Fees: 1.2% of net asset annual value, with a membership fee of $23-40 per year

ASB

ASB’s positive impact fund ensures your money is invested in companies that strive for good social and environmental impact. 60% of your investment goes into income assets such as shares and properties, while 40% goes to growth assets such as bonds and cash.

Fund: Balanced
Fees: 1.3% for the year ending, including management and membership fees

Booster

Booster has three comprehensive socially responsible investment funds: moderate, balanced, and growth. They categorise their ethical investment options using the Principles for Responsible Investment set by the United Nations. Generally, this excludes fossil fuels, GMOs, tobacco, and firearm production for civilian use.

Fund: Moderate, balanced, growth
Fees: 1.12-1.3% annual charges depending on the fund. For accounts with a balance of more than $500, an annual membership fee of $36 applies.

CareSaver

CareSaver uses environmental, social, and governance (ESG) metrics in considering which companies are ethical. With their goal to become the most ethical KiwiSaver scheme, they don't exclude ‘unethical’ companies, but invest more in ‘ethical’ companies.

Fund: Growth, balanced, conservative
Fees: 0.8-1.25% per annum management fee depending on fund type. An annual administration fee of $27 is also charged for balances over $1,000.

Can I switch to an ethical KiwiSaver provider?

Of course! You can change your KiwiSaver scheme anytime. Simply arrange the transfer of your old scheme to a new one. This process may take time, but it’s worth the wait if you can contribute to the betterment of the environment and society. Your old provider may charge you some fees, so consult this as well.

Switch to an ethical KiwiSaver provider today! Make sure you find the right scheme that fits your needs and values. Compare KiwiSaver schemes using CompareBear’s comparison tool, right here!