Investing with integrity – your guide to ethical KiwiSaver funds

Aligning your investments with your ethical beliefs is not just empowering – it's a proactive step toward a more responsible and fulfilling financial future. In this article, we'll answer some of the commonly asked questions about ethical KiwiSaver funds and help you ensure your investments reflect your personal values. 

What is ethical investing and why is it important for KiwiSaver funds?

Ethical investing involves making investment decisions that not only aim for financial returns but also consider social good and environmental sustainability. In the context of KiwiSaver funds, ethical investing means choosing funds that reflect your particular moral values or societal goals, such as reducing environmental harm, avoiding industries that test products on animals, or supporting those that promote workplace equality.

For KiwiSaver participants, ethical investing is particularly important because it means you have the peace of mind in knowing your retirement savings are working towards a better future, not just growing in value. This alignment of personal values with investment choices can provide a sense of personal fulfilment and responsibility towards future generations. 

Ethical KiwiSaver funds also provide an avenue for investors to influence companies and industries towards more sustainable and socially responsible practices. 

Does that mean there are funds that are not ethical? Should I be worried about my KiwiSaver fund being invested in something immoral or illegal?

The distinction between ‘ethical’ and ‘non-ethical’ funds often depends on the specific criteria and values set by each investor. While some funds explicitly prioritise ethical considerations, others may not place as much emphasis on these aspects. This doesn’t necessarily mean that other funds are unethical; rather, they simply have different priorities.

It's important to clarify that being less focused on ethical criteria doesn’t imply that a fund is investing in unethical activities. All KiwiSaver funds, and indeed all investment funds in New Zealand, must follow strict laws. These laws make sure they operate above board and stay away from any illegal activities.

But, if you’re someone who cares deeply about where your money goes – for instance, if you’re against animal testing, gambling, or tobacco – it’s important to look into your fund’s strategy. You might find that some legal investments don’t sit right with your personal values. If you’re unsure or concerned about the ethics of where your KiwiSaver money is invested, it’s a good idea to do a bit more digging. 

That’s where it can help to talk with an experienced financial advisor who can help ensure your investments match up with your ethical standards. 

What due diligence steps can I take to ensure my KiwiSaver fund meets my ethical values?

A good first step is to check your KiwiSaver scheme’s Product Disclosure Statement (PDS). This document gives you a rundown of the fund’s investment strategy and what it aims to achieve. 

But knowing where your money is invested is just the beginning. If you want to really understand the ethical impact of your investments, you’ll need to look a little deeper. A tool like Mindful Money can be very helpful here. It doesn’t just show you where your funds are invested; it also highlights the ethical implications of these investments and points out if your money is going into any controversial sectors.

However, interpreting these findings can be complex, as what constitutes an ethical concern can vary from person to person. For instance, a fund might show a flag relating to an issue that may be an ethical concern to some but not to others – investments in adult entertainment or medicinal cannabis for example.

As a financial advisor, I can talk through these ethical flags and provide clearer insights into what each one means for you, helping you decide what's a dealbreaker and what isn't. 

How do you help clients who want their KiwiSaver to reflect specific ethical concerns, for example, if environmental impact is something I’m really concerned about?

The first step is a thorough discussion to clearly understand what matters most to you. For instance, if your concern is environmental sustainability, this might mean looking for investments in renewable energy, steering clear of fossil fuels, or choosing companies with robust environmental policies.

Next, we’ll look at KiwiSaver funds that align closely with these preferences. We look closely into the history and actions of these funds, examining not just their investments but also how actively they work towards mitigating environmental harm. 

It’s important to also assess the transparency and reliability of the fund’s environmental claims. This often involves checking for third-party certifications or accolades that back up the fund’s dedication to environmental standards. This way, you can trust that your money is truly working towards the causes you care about.

How do ethical investments stack up against traditional funds in terms of returns?

There used to be a misconception that ethical funds might not perform as well because the investment choices were more limited. But that’s changing. Recent studies and trends show that ethical funds are holding their own, often matching or even outperforming traditional funds. This success is partly because they frequently invest in sustainable companies that are leading the way in innovation and efficiency – traits that can translate into strong financial performance. Additionally, as more people look to invest ethically, these funds are seeing increased demand, which can also help boost their returns.

How We can Help

Making sure your money works for both your financial future and a better world can seem daunting, but you don't have to navigate it alone. Contact me today and let’s get your KiwiSaver doing good in the world while also securing your financial future.