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How Can I Invest Ethically?

Contributor:
Mary Holm
Mary Holm

Question:

I own no stocks but would like to know if it is possible to invest "ethically" (for example, no armaments companies or greedy pharmaceuticals) - whether through KiwiSaver or elsewhere.

In fact, it seems that with the developing greening of the economy (for commercial reasons) there may be more openings for "ethical funds". What say you? The property market seems to be less and less attractive for mums and dads.

Answer:

Mary Holm: It certainly is possible to invest "ethically" through KiwiSaver. And given the incentives that go with the scheme, KiwiSaver is probably the best way to make ethical investments - as long as you are happy to tie up your money until you buy your first home or hit NZ Super age.

Since April, all KiwiSaver providers have had to disclose whether they offer "responsible" investment options.

While they are allowed to say "No", I suspect the very asking of the question has prompted some providers to think about the issue.

When I was researching my new book, the following providers said they were offering ethical funds or similar:

* ABN Amro Craigs - Balanced SRI Defined Portfolio - 50 per cent shares, 40 per cent cash and fixed interest, 10 per cent property. Invests in companies making positive social or environmental contributions, or trying to do so.

  • ASB Group Investments - Global Sustainability Fund - 100 per cent world shares. Not an "ethical" fund as such. Invests in "companies that integrate sustainable issues with fundamental equity analysis for superior long-term returns". Run by ex-US vice-president Al Gore and David Blood.
  • Asteron - Socially Responsible Investment Share Fund - 100 per cent New Zealand and Australian shares. Excludes tobacco, alcohol, armaments and gambling companies.
  • Fidelity - Ethical Kiwi Fund - 40 per cent international shares, 35 per cent fixed interest, 20 per cent New Zealand and Australian shares, 5 per cent cash. Avoids companies earning substantially from tobacco, gambling, alcohol and armaments.
  • NZ Anglican Church - The King of the Ethical Investors, with all three of its funds invested "ethically".
Conservative Fund has 20 per cent growth assets (shares and/or property), Balanced Fund has 50 per cent growth assets, Growth Fund has 75 per cent growth asset. Avoids direct investment in arms, gaming, tobacco, pornography, breweries, companies with poor environmental records, bad industrial relations or unethical or "remuneration-focused" boards and executives. The fund managers sometimes use their voting power to try to change management policies.
  • SuperLife - Ethica Fund - 60 per cent New Zealand and overseas shares and property, 40 per cent cash and bonds. No companies involved in arms, gambling, tobacco, alcohol, abuse of children and other human rights. Supports companies with positive impact on environment. Welcomes member feedback on the principles used in choosing investments and on any investments included in the fund.
A number of others say they are looking into it, so keep an eye out for new announcements.

One interesting possibility is the union-connected KiwiSaver provider IRIS, which is considering a fund that takes into account the use of child labour, worker abuse and exploitation of Third World labour forces.

Many providers also said they used ethical "screening" to some extent on some or all of their funds.

Fees on these funds are often a bit higher than on other funds holding similar assets, because more research is required. Whether you have to sacrifice higher returns if you use ethical or similar investing is open to debate. Some research says yes, some says no.

 

 

Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter. Her written advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following that advice.   

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