This included some of the largest KiwiSaver providers resulting in the biggest fall in harmful investment since Mindful Money started tracking ethical investment trends five years ago.
In the six month period to September 2023, there was a 72% reduction in investment in tobacco companies, 35% reduction in weapons, 29% reduction in gambling, 25% reduction in companies that test products on animals or cause animal suffering, 24% reduction in alcohol, 16% reduction in pornography/adult entertainment and a 7% reduction in environmental damage.
Mindful Money CEO Barry Coates says until now, most of the shift towards ethical investment has come from the smaller and medium-sized funds including Pathfinder, Medical Assurance Society (MAS), Simplicity and Always Ethical.
“However, over the past six months we have seen significant reductions in harmful investment by many of the largest KiwiSaver funds.”
This includes an overall reduction of 37% by ASB, a 22% reduction by AMP and a 16% reduction by ANZ. Meanwhile the fastest growing fund, Fundrock-owned Aurora, recorded a 23% decline in issues of concern.
“Most of the reductions have been a result of changes that KiwiSaver managers have put in place over recent years to reduce carbon emissions in their portfolios and increase investments in companies with higher social and environmental standards,” says Coates. “Funds such as ASB and Aurora have also changed their external fund providers to reflect a more ethical approach.”
He says overall the reductions are even more significant as a proportion of the total because KiwiSaver investment was 4.8% higher in September 2023 (a record $101 billion) than in March 2023. He puts it down to customer demand and transparency aided by the Mindful Money website which has been visited by more than 300,000 people since its launch four years ago.
“The most common reaction has been ‘I didn’t sign up for this’,” he says. “Many have complained to their KiwiSaver provider or switched funds. Consumer power is changing the practices of the investment sector.”
However, the reductions in harmful stocks didn’t include fossil fuels and companies cited for human rights violations, says Coates.
“Investment in fossil fuel companies is at the highest level ever, at $3.29 billion. Over one third (37%) of that investment is in global companies that are still expanding their exploration and production, and a smaller amount (34%) in companies (like Contact Energy) that are transitioning to renewable energy on a 1.5°C pathway.
“This is hard to understand at a time when hundreds of thousands of Kiwis are suffering from the impacts of extreme weather related to climate change. KiwiSaver investors are still supporting the fossil fuel companies that are contributing to the flooding, wildfires, sea level rise and droughts that are causing massive suffering in our communities and in the poorest and most vulnerable communities, including our Pacific neighbours.”
Coates is calling for providers to divest from fossil fuel companies that are not transitioning to renewable energy on a net zero pathway.
“Companies like Exxon Mobil and Shell have been promising to make the transition for over 30 years since the climate convention was signed in 1992. It is time to stop the greenwash.
“These investments are also financially risky. The companies still increasing their production, and the KiwiSaver providers investing in them, are risking huge losses from a decline in production and from stranded assets - the infrastructure and reserves that will become unusable in the future. The International Energy Agency predicts fossil fuel demand will decline after 2028, a few short years away. The rate of decline is likely to be steep.”
He says the impact on share prices has already started. “Despite the increase in oil prices caused by Russia’s invasion of Ukraine, the value of fossil fuel companies, measured by the US Oil & Gas index, is still 6.7% below the level 10 years ago. During that time the S&P 500 index has risen 260.1%.”
Israel and Palestine
Mindful Money is also calling for providers to divest from companies that support Israeli settlement in Palestine. Included in Mindful Money’s violation of human rights category are Israeli and global companies that have a direct involvement in developing and maintaining Israeli settlements in occupied Palestine - a total investment across all KiwiSaver funds of $124 million.
In 2016 the New Zealand government cosponsored the UN Security Council’s resolution 2334 declaring that Israeli settlements were a violation of international law, says Coates. Overall $7.9 billion worth of KiwiSaver remains invested in fossil fuels, weapons, animal cruelty and human rights violations.