Appendix – Does Your KiwiSaver Fund Climate Change?

Note: Divestment refers specifically to a publicly-made commitment to withdraw all investments in a given industry (e.g. fossil fuels) AND not to invest in those industries in the future. This is generally referred to as “exclusion” in a KiwiSaver’s investment policy.

Divestment is different from simply not investing in an industry, as it needs to be written in policy, and there needs to be a commitment to no future investment.

Finally, the purpose of divestment is to strip an industry (like fossil fuels or weapons) of its social licence; in other words, making an industry look less socially acceptable or palatable. Once again, this requires a written policy, committing to excluding unethical industries, in order to contribute to changing the discourse around those industries.

1. A Quick Look at the Investment Policies.

Booster

All funds

Page. 1 of the “Booster KiwiSaver Scheme SRI Policy Statement” initially referred only to the two Socially Responsible Investment (SRI) funds. However, we have received confirmation from Booster that it also applies to all their other funds.

“Specifically, investments in directly-held companies and managed fund investments with more than an incidental proportion of revenue [emphasis ours] generated from the following activities are excluded:

  • Alcohol Production
  • Gambling Operations
  • Tobacco Production, Distribution, Supply and Retailing
  • Military Weapons Manufacturing
  • Civilian Firearms Production, Distribution, Supply and Retailing
  • Nuclear Power Production and Uranium Mining
  • Fossil Fuels Exploration, Extraction, Refinement, Distribution, Supply and Retailing
  • Adult Entertainment Content Production
  • Genetically Modified Organisms (GMO), excluding Research and Development.”

Indirect investment

Due to the fact that the SRI policy specifies “directly-held companies and managed funds” and those companies and funds are only excluded if the hold “more than an incidental proportion of revenue” in the excluded industries, we cannot say that Booster doesn’t indirectly invest in these industries. We were also only able to get confirmation that there were no direct investments in tobacco and controversial weapons.

Superlife

Ethica

Ethica is Superlife’s Socially Responsible Investment fund. In their Statement of Investment Policy Objectivesunder Ethica (p. 16), they state:

“Current investments and sectors that are excluded are those where a material part of their revenue and/or activities are in the areas of gambling, tobacco, alcohol, armaments, pornography and fossil fuel extraction.”

(Direct communication with Superlife has confirmed that nuclear weapons are included in their definition of “armaments,” and are therefore excluded in the fund).

All other Superlife funds

Superlife’s Statement of Investment Policy Objectives does not specify that any other fund has ethical exclusions.

Koinonia

Koinonia KiwiSaver scheme’s Ethical Investment Policy states the following (p. 1; emphasis added):

“(a) It should endeavour to avoid direct investment in:

  • the armament manufacturing industry;
  • the gaming industry;
  • the tobacco industry;
  • the pornography industry; and
  • breweries;

(b) It should endeavour to avoid unnecessary exposure to companies whose primary focus is the extraction and production of fossil fuels subject to retaining the ability to hedge energy price risk.

(c) It should endeavour to avoid direct investment in companies where the activities of the individuals in key positions (eg. the CEO or Chairperson) raise serious ethical concerns;

(d) It should endeavour to avoid direct investment in companies with a poor environmental record or consistently bad industrial relations;

(e) It should endeavour to avoid direct investment in companies where management appears to be excessively concerned with its own remuneration (including by way of loans)”

(Communication with Koinonia has confirmed that they exclude nuclear weapons.)

Due to fossil fuels not being included in the list of direct investments that the fund will avoid, and the fact that the policystates simply that they “endeavour to avoid unnecessary exposure” to fossil fuels, the fund is not considered by 350 Aotearoa to be divested from fossil fuels, as there is no way to measure what “unnecessary exposure” is,, and therefore does not get the fossil fuels tick on the “ Does Your KiwiSaver Fund Climate Change?” table.

Kiwi Wealth (all funds)

Kiwi Wealth has a list of “Zero Tolerance Exclusions” in their Responsible Investment Policy(p. 3):

“Companies which are involved in any of the following product areas will be excluded for both direct and indirect investment:

●Tobacco – the tobacco industry’s products are both highly addictive and highly deleterious to health. In addition, their products are aggressively marketed in emerging economies, amounting to widespread human victimisation. We exclude companies where tobacco is the primary industry.

●Controversial and nuclear weapons – controversial and nuclear weapons are characterised by being particularly likely to cause civilian casualties either due to their intended usage or due to unintended casualties. This category covers weapons such as cluster bombs, landmines, depleted uranium weapons, chemical and biological weapons, nuclear weapons. We exclude any company identified as being involved in this category.

●Whaling and whale meat processing – the whaling industry has decimated many whale populations. The New Zealand government is strongly committed to anti-whaling efforts and whaling remains a deeply unpopular industry in New Zealand. We exclude any company identified as being involved in this category.”

In their Statement of Investment Policy and Objectives for all of their funds, Kiwi Wealth states (on p. 15) generally that “the Investment Manager maintains a responsible investment policy with some exclusions and giving consideration to environmental, social and governance issues,” Linking to their Responsible Investment Policy. The above Zero Tolerance Exclusions therefore apply to all their KiwiSaver Funds.

Simplicity

Simplicity’s Statement of Investment Policy and Objectives (SIPO) can be found on this webpage.

While Simplicity’s KiwiSaver has an Environmental, Society and Governance (ESG) policy (a broad ethical investment guideline that does not necesarilly involve full divestment), that policy does not cover all investments. Their ESG policy does exclude tobacco and controversial weapons, however it only applies to one of the funds they invest in (Vanguard Fund).

Simplicity invests in both overseas and domestic funds. All overseas investments appear to be held in Vanguard (p. 4):For offshore investments, the scheme invests in funds managed by Vanguard Asset Management Limited (Vanguard), a subsidiary of the Vanguard Group, Inc.

Simplicity has made the effort to put all overseas investments in a large fund that excludes some unethical industries – however, they do not specify where their other investments are held. For that reason, while overseas funds have been divested from tobacco and controversial weapons, domestic funds have not been deemed divested, since industry exclusions would need to be written in their policy.

The Vanguard international share fund that we invest in specifically excludes investments in companies involved in tobacco, controversial weapons, nuclear weapons, and nuclear weapon components.

-Simplicity’s SIPO (p. 8)

Mercer (all funds)

All of Mercer’s funds are covered under their Responsible Investment Policy, which states on p. 5:

“As at the date of this policy, Mercer (NZ) Ltd has determined that the following products should be excluded on this basis:

  • Companies manufacturing cluster munitions, landmines, chemical or biological weapons, or nuclear weapons.
  • Companies manufacturing tobacco products.”

This article confirms that Mercer still has indirect investments in controversial munitions. This articleconfirms that they would fully remove indirect investments from the above industries by the end of 2018. However, “…despite investment exclusions to tobacco manufacturers, Mercer will continue to invest in tobacco retailers.”

ANZ, Westpac, ASB, and BNZ (all funds)

The four Big Austrailan Banks have their own KiwiSaver schemes, and all funds fall under their respective Statements of Investment Policy Objectives.

ANZ

The Responsible Investment Advisor for ANZ confirmed that ANZ’s KiwiSaver funds have neither direct nor indirect investments in controversial munitions or tobacco. There is no information available on fossil fuels.

The ANZ KiwiSaver Scheme and ANZ Default KiwiSaver Scheme SIPOs can be found on the Disclosewebsite. While they do acknowledge Environmental, Social and Governance (ESG) factors, neither SIPO lists any specific exclusions, stating (p. 7 in both documents): “for the avoidance of doubt, we do not make investments in companies or industries based solely on ESG factors.” Therefore, there is no reason to believe they have divested from fossil fuels.

Westpac

Westpac’s Responsible Investment Policy (p. 5) says that they exclude controversial weapons and tobacco:

“The asset exclusions currently encompass the following;

  • Companies involved in the manufacture of nuclear weapons, cluster munitions and antipersonnel mines (together, “controversial weapons”),
  • Companies involved in the manufacture of tobacco, and
  • Companies involved in the processing of whale meat.”

There is no information about fossil fuels in their Responsible Investment Policy or SIPO, and they were unable to give any information about indirect investments. Due to the information in two different media articles in 2017, it appears that they have not divested from indirect investments in controversial weapons [article] or tobacco [article].

ASB

ASB’s Wealth Operations Consultant has confirmed that ASB’s fund has no direct or indirect investments in controversial weapons. ASB’s SIPO can be found on the Disclosewebsite, and their Responsible Investment Commitmentscan be found on the ASB website. They do not mention anything about ethical exclusions for tobacco or fossil fuels.

BNZ

According to BNZ’s media release in March 2017:

Companies involved in the production of cluster munitions, anti-personnel mines, nuclear weapons and tobacco or tobacco products are excluded.

There is no information about fossil fuels, and contacting them did not yield any information about indirect investments.

AMP (all funds)

While AMP does have a Responsible Investment Fund, it does not specify what is excluded, and there is no other information about their Responsible Investment Policy aside from the vague mention below.

As stated in the Statement of Investment Policy Objectives, “The Fund will (or will invest in underlying funds that will) have a responsible investment policy (which involves at a minimum, avoiding investment in any company which has a substantial exposure to sectors identified as having a high negative social impact).

If an investment of the underlying fund falls below responsible investment standards, then the Manager will seek to exit investment in that underlying fund within six months of becoming aware of this unless remedial action is taken by the underlying fund manager to bring the investment back within the responsible investment parameters.

No other fund has any ethical investment policy (p. 6): “The AMP Responsible Investment Balanced Fund is the only Fund in the Scheme where the Manager adopts a responsible investment policy. This is implemented within the underlying fund by the underlying fund manager and not directly within the Fund.”

2. Defining “controversial Munitions”

Many KiwiSaver schemes that exclude munitions state specifically that they exclude “controversial munitions,” which is a select category of weapons.

Controversial munitions are described by Kiwi Wealth (p. 3) as, “being particularly likely to cause civilian casualties either due to their intended usage or due to unintended casualties. This category covers weapons such as cluster bombs, landmines, depleted uranium weapons, chemical and biological weapons, nuclear weapons.”

Mercer similarly excludes (p. 5) “cluster munitions, landmines, chemical or biological weapons, [and] nuclear weapons.”

Simplicity’s SIPO states (p. 8): “The Vanguard international share fund that we invest in specifically excludes investments in companies involved in tobacco, controversial weapons, nuclear weapons, and nuclear weapon components.”

“Mercer defines “controversial weapons” as cluster munitions, landmines, biological and chemical weapons,” according to this article.

Westpac’s Responsible Investment Policy (p. 5) defines “controversial munitions” as “nuclear weapons, cluster munitions and antipersonnel mines.”

The Wealth Operations Consultant at ASB has confirmed that controversial weapons are defined as being “involved with the following activities:

  • Development or production of cluster munitions;
  • Use, acquisition, possession or transfer of anti-personnel mines; and
  • Manufacture, acquisition or possession of, or control over, any nuclear explosive devices.”