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Just because investors are promised “ethical investments” doesn’t mean they’ll have them.
It seems many are being misled by fund managers who are doing just the opposite, Mindful Money research has found.
The not-for-profit group researches investment providers and helps consumers understand where their money is being invested. It has just completed a study of 800 or so investment funds. Around half were KiwiSaver.
The research discovered some $11 billion were “unethical investments” in business involving fossil fuels, animal testing, alcohol production and questionable human rights practices.
Mindful Money’s founder and chief executive Barry Coates (pictured) said the trend is completely at odds with overwhelming demand for ethical investing.
He’s questioning the broad industry claims of embracing the “ethical” trend.
“The latest trends in New Zealand investment are worrying. Instead of moving towards net zero by reducing the fossil fuel companies in their portfolios, fund managers have doubled down and invested far more.
“Instead of making empty promises about being ethical and responsible, fund managers need to walk the talk and back up their rhetoric with the reality of their portfolio holdings.”
Last month the Financial Markets Authority warned it would be cracking down on greenwashing – making investments seem ethically sound.
The Mindful Money survey showed:
- a 64 percent increase in the amount invested in fossil fuel companies, which reflects the sharp rise in global fuel prices
- a double-digit increase in funds in companies which use animals for testing
- a 25 percent rise in the amount invested in alcohol producers
Coates said KiwiSaver and other New Zealand investment funds might not be fully aware the investments have been moved. They either contract the funds’ management to overseas third party managers or invest it in passive funds that automatically track various indices, he explained.
He stopped short of accusing the investment industry of deliberately lying to consumers.
“This does look like it’s misleading information. Many of the funds say they engage with the companies to improve their performance but we see very few details of that happening.”
Mindful Money won’t name the companies involved, but Coates says they will be asking them for more information and explanations.
If investors changed investment providers it might send a message about unethical investment funds, but on its own this won’t be enough, Coates suggests.
He thinks stronger measures are needed, for example official regulation and enforcement from the likes of the Financial Markets Authority to bring about change.
“KiwiSaver providers should have an obligation to tell the public about what they are doing with regard to reducing their harmful impacts on the climate, the environment and society, as well as their investments in positive benefits,” he says.
“Reporting should be consistent and comparable, using clear standards, as there are for reporting on financial issues like fees, returns and benchmarks.”
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