Can Your Sustainable Investing Really Make a Difference?

Your KiwiSaver or managed fund is only a tiny drop in an ocean of global investment – so does responsible investing even matter? It definitely does, says Victoria Harris of Devon Funds.

Businesses live or die on their ability to generate funds. They’re like plants: feed them cash and they’ll grow, extend in new directions and produce more fruit. Starve companies of cash and they remain smaller. They can’t launch into new regions, develop new products or attract the best people. Your investments have the power to make this change – you’re part of the big picture. By investing in the types of businesses that align with your personal values, you’re encouraging them to succeed. And you can ensure your money is not invested in companies that sell weapons, pollute the environment or (directly or indirectly) rely on modern slavery and child labour. Even though you might only have $30,000 in KiwiSaver, it does count. Your choices contribute to investor demand, which is the force that’s shaping how funds invest. If enough investors demand higher standards from their funds, those funds will be compelled to invest in more sustainable companies. Globally, sustainable investing assets have grown by more than 50 per cent since 2016, now totalling over $35 trillion, according to AMG research.

Check your KiwiSaver fund: there could be some nasty surprises

In June this year, Mindful Money released numbers showing that $190 million in KiwiSaver funds was invested in companies involved in manufacturing weapons including firearms, missiles and ammunition. Their survey found that 81 per cent of Kiwis don’t want to invest in these types of companies, yet 88 separate providers were involved. You might also find big name brands that, when you think more deeply about them, are not necessarily aligned with your values. Coca Cola, for instance, produces a lot of plastic, while Estee Lauder does some testing on animals. When I talk to New Zealanders about their KiwiSaver, my experience is that most people assume their fund is investing responsibly, but they don’t really know for certain. There are some ESG rules for default KiwiSaver funds, which providers often apply more broadly. But outside the default schemes, funds can pretty much invest in any legal company. Also, the ESG rules remain fairly lenient, which is how a small proportion of less ethical investments can still manage to be included in default funds.

Your feedback can drive change

You can use the Mindful Money website to look at your KiwiSaver fund and see how much is invested in ‘issues of concern’ as well as comparing it to other funds. If you do find that your fund is invested in a way that doesn’t align with your values, you can choose to move your money. But don’t miss the opportunity to let the fund manager know why you are moving. Feedback from everyday consumers is causing a massive shift in the way superannuation funds invest, and across the globe these massive super funds are some of the biggest institutional investors around. When they move their strategy, even just a nudge, it has the power to shape markets. So don’t just vote with your dollars, also let the fund know why you’ve moved away.

An easy way to make a difference

It’s not always easy to make a difference in the world – there might be reasons you still need to drive an ICE vehicle; maybe you wrap your leftovers in clingfilm; maybe you feel a little guilty about those air miles. You probably know where you should make changes, but it can be difficult. Switching your investment into an ethical fund is such a simple and easy step to make a tiny, but measurable, difference in the world. Even though you might only be investing your $30,000 KiwiSaver fund, when you do that there’s another 100 million people behind you, and together you’re changing the world. Remember, ‘It’s only one plastic straw, said 100 million people’. You’re supporting the way these businesses operate and how they’re run, encouraging them to grow, and sharing in their success. You’re driving sustainable innovation and productivity, which raises the standard of living for everyone around the globe.