Clive Fernandes
Auckland, February 15, 2024
In a noteworthy development, KiwiSaver providers have made substantial adjustments to their investment portfolios, reducing exposure to companies that they have deemed ethically questionable according to the ethical rating website Mindful Money.
This marks the most significant decline in such investments since they tracked ethical investment trends five years ago.
Multiple surveys of the KiwiSaver investors also point towards wanting to be more ethical in their investments.
However, contrary to consensus and survey findings, data from National Capital KiwiSaver HealthCheck submissions shows that in the past year, merely 8.3% of individuals were open to sacrificing potential returns or accepting higher fees for Environmental, Social, and Governance (ESG) considerations, presenting a discrepancy in attitudes.
Ethical Considerations
As KiwiSaver providers navigate towards ethical considerations, National Capital’s HealthCheck data adds depth to the ongoing conversation about the delicate balance between ethical considerations and financial returns for the average investor.
Key Insights from HC Stats: Trade-off Consideration: Only 8.3% of respondents signalled a willingness to prioritise ESG factors over potential financial gains, highlighting the broader sentiment that financial considerations remain the most important factor for most people.
Ethical Investment Awareness: While there is a positive trend towards ethical investing, the statistics emphasise the importance of finding a balance that aligns with the unique preferences of KiwiSaver members.
Navigating the Ethical-Financial Balance: The challenge for the industry lies in navigating the delicate trade-off between ethical considerations and financial returns. This data suggests that the public still prioritises traditional financial metrics over ESG factors in their investment decisions.
A report by funds network Calastone says that funds transacted across its global network carrying environmental, social and governance labels saw net outflows of US$10.2 billion in 2023. KiwiSaver providers are tasked with addressing this dual perspective – fostering ethical investments while ensuring competitive fees and returns for investors.
The recent reductions in harmful investments signal a positive step, but the industry must acknowledge and address the broader concerns raised by these statistics.
Implications and Opportunities
Building on Mindful Money CEO Barry Coates’ positive sentiment towards KiwiSaver providers responding to customer demands, the reductions in harmful investments serve as an essential milestone. However, as National Capital’s data highlights, challenges persist in aligning these efforts with the varying priorities of the wider public.
As the KiwiSaver industry evolves towards ethical investments, National Capital’s data emphasises the importance of acknowledging and accommodating the varying priorities of investors. The journey towards a more ethical financial landscape may involve finding a middle ground that respects both the growing demand for ethical investments and the financial expectations of the wider public. Balancing these perspectives will be crucial in shaping the future trajectory of KiwiSaver investments.
What should KiwiSaver investors do?
Investors do not have to choose between ESG criteria, returns, and fees.
By adhering to National Capital’s six-pillar investment selection framework, KiwiSaver investors can find funds that effectively balance these priorities. The pillars include Performance, Organisational Capability, Fees, Organisational Stability, Processes & Portfolio Composition, and Ethical Investing Considerations.
To align your KiwiSaver with your financial objectives and ethical standards, we recommend completing the National Capital KiwiSaver HealthCheck. This is vital to achieving financial well-being and making ethically responsible investment choices.
Clive Fernandes is the Director of National Capital, a financial advisory firm that provides personalised investment advice, primarily focusing on KiwiSaver.
Disclaimer: The views expressed in the above article are his views. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
