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13 February 20
So climate’s on your mind, and you’re committed to being a part of the solution. You’re buying locally, eating flexitarian, driving and flying less, probably even been marching on Fridays.
Did you know your KiwiSaver choices can follow your heart, too? The fund you choose not only can match your values, it can even help cool the planet.
There are many innovative efforts these days to reverse global warming and even draw down the amount of harmful gases we’ve released into the atmosphere. Many solutions will need to come from companies.
That takes investment. And that’s what KiwiSaver’s about.
Many people don’t realise this, thinking they’re just saving for retirement or for a first home. But as we funnel money into a fund, it’s being invested for us – often in shares of companies, or bonds that can actually be loans to those companies.
Which companies? What industries? It’s good to know where our money is flowing. Just as we make ethical choices on what we consume – superfoods, healthy snacks, sustainable beauty products – we can also make choices when we buy into some investments and not others.
But before we jump down that rabbit hole and look at which investments are “ethical” and which are not, we need to take a couple of important steps:
There’s no point being in the most ethical KiwiSaver fund in the world but it being the wrong type of fund for your needs. You may as well not be in KiwiSaver at all and do something else with your money (but then you’d miss out on all the KiwiSaver advantages).
There are hundreds of KiwiSaver funds out there, which tend to be grouped into five types, based on the proportion of risky investments they hold:
(‘Aggressive’ is not about your personality, but rather because these funds hold the most risky investments like shares and commercial property.)
Even if you think you’re in the right type of fund for you, circumstances change, so it pays to double check every now and then. Here are three questions to help:
You may have already chosen a fund, or the government may have effectively selected one for you when you were opted into a KiwiSaver “default” fund.
But now that you know your type, does your current fund match? If your type is “growth”, are you in a growth fund? If not, it’s time to find one.
In KiwiSaver, everyone needs to actively choose which fund they’re in – especially if they want it to match their values and not keep heating up the globe.
You may have already been to Sorted’s Smart Investor – where you can browse through funds by type. Inside each fund is a mix of investments. You can also compare the fees they charge (that’s the amount we pay the fund manager to invest our money). In short, you can check all the top information about a fund that’s available.
At this stage we need to look at what’s inside each fund to see whether the investments are climate friendly.
You could have another look at Smart Investor – it’s the first tool that enables you to see the entire list of every investment in each fund. That’s especially good if you want to geek-out on all the information, but happily there is also a simpler way.
Websites such as Mindful Money make it transparent – you can easily see whether the fund you’re thinking of choosing holds investments that are climate challenged, and check other ethical considerations you may have as well. Check to see what’s inside your fund here.
It’s one thing to make sure your fund doesn’t have anything nasty or controversial in it – it’s quite another to choose a fund that has specific ethical goals. Here’s a short list, once again organised by fund type:
In the rush to save the planet, there's no point running to a fund that isn’t the right type for you. You could miss out on tens of thousands of dollars if you’ve got the wrong type for your situation. Sort that first, then find your ethical match.