Do Kiwis know where KiwiSaver funds invested?

Requiring KiwiSaver default schemes to invest responsibly would likely bring them morally into line with the investment philosophy of most New Zealanders, an academic says.

Monday, December 1st 2014, 6:00AM

by Susan Edmunds

Dr Matheson Russell, a senior lecturer in philosophy at the University of Auckland, spoke at the 2014 New Zealand Responsible Investment Briefing last week.

He said he would conduct research over the next six to 12 months to find out what New Zealanders thought about responsible investing, and whether they would rather their KiwiSaver investments were not in tobacco, arms, labour exploitation, nuclear energy, gambling, pornography and fossil fuel extraction.

At present, about $45 million of the $22 billion in KiwiSaver is in socially responsible funds.

“Responsible investing is seen as a fringe thing in the investment industry at large. Mum and dad investors, the ordinary workers who now have money in managed funds through KiwiSaver, think about their investment portfolios differently to investors. I have a sense that a lot of New Zealanders would feel uncomfortable about their money being invested in, for example, tobacco, pornography or gambling. They may be surprised that they have investments in these things through KiwiSaver.”

Requiring default schemes to be responsibly invested would have a number of benefits, Russell said.

“You’re not auto-enrolling people in investments they may not be comfortable with. From a public policy point of view, it’s in our interests not to channel large amounts of new capital to industries that are causing harm.”

There has been limited take-up so far of responsibly-invested funds.

But Russell said that was not because people were not interested.

Many people might want to invest responsibly but did not because they had to opt in to responsible funds to do so, he said. But if it were the default, it would make it easy.

“If responsible investment was standard, most would be really happy to be involved in that. If workers are going to be automatically enrolled in retirement savings schemes, it seems to me that they shouldn’t be enrolled in schemes they would find morally compromising…These days there is a lot of criticism of the role the finance industry plays in supporting socially and environmentally harmful industries. SRI defaults would provide an easy and effective way for the finance industry to reduce its complicity with these industries. And, importantly, it would come at very low, perhaps negligible, cost to the fund providers.”

He said a responsible approach need not be have higher fees. At present, responsible investment funds are more expensive but the economies of scale should reduce that, he said. “Returns could be as good, if not better.”

Even if they were not, Russell argued that might be a price ordinary investors were willing to pay.

“There’s a disjunct between the way the investment community thinks and the way individuals think. To think that people might be willing to sacrifice a level of return to invest in things they were comfortable with doesn’t compute, it almost seems blasphemous to say you’ll forego a return because you don’t want your money in gambling but I have a sense people are willing to forego a return if it’s from ill-gotten gains.”

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