Are your KiwiSaver funds used ethically – or not? Here's how to know

If you have a KiwiSaver account, you're not just a saver you're a shareholder and that means you can hold some sway over how well businesses behave. Frances Cook reveals how you can know one way or the other.

While you might think of your KiwiSaver as a savings account, it’s actually full of investments.

At least part of your KiwiSaver is invested into different companies, which earn money, and then ideally share some of those profits with you. This gives you a super power. The ability to put pressure on businesses, to make sure they’re acting ethically. Want to know what’s more powerful than a consumer boycott? A retirement fund boycott.

Just as you might skip a cup of coffee to protest against a company whose politics you don’t agree with, moving your KiwiSaver is one of the most powerful things you can do.

Companies tend to care more a lot what shareholders think, than any pressure that comes from journalist questions, governments, or even their customers. Shareholders reign supreme. And guess what your KiwiSaver makes you? A shareholder.

There are 3.3 million New Zealanders in KiwiSaver, with an average balance of $33,514 in their accounts. Those tens of thousands of dollars can build up in an individual KiwiSaver account surprisingly quickly, which means you have big purchasing power on your side.

So you’d best believe that companies are paying attention to where that money goes.

It’s not always easy, however, to check that your KiwiSaver is doing the good that you hope it is. Search for ethical options, and greenwashing is everywhere: vague claims of doing good, without much action to back it up.

Here are some red flags to look out for, to know if your KiwiSaver is actually doing what you want it to.

There are two main strategies a KiwiSaver fund uses, to invest ethically.

The first is excluding "sin stocks". This means the fund might not invest into things like tobacco, gambling, or weapons manufacturing.

But it doesn’t just have to be steering clear of the bad stuff.

There is also impact investing, where investors deliberately buy into a company that’s operating in the grey zone. That means the company isn’t currently doing great things for the world, but there’s the possibility of changing its business structure or management style, so that it operates in a more ethical way.

Buying shares and then using shareholder meetings to push for change can be a powerful method, and there are KiwiSaver providers that take that more active approach.

We’re all busy, so looking for legitimate awards and certifications is an easy cheat code for checking that your provider is putting your money where their mouth is.

AMP sustainable investment analyst Kate Brownsey recommended using Responsible Investment Association Australasia (RIAA) certified funds, as it means the fund has been independently audited and verified as meeting minimum standards.

There’s also United Nations Principles for Responsible Investment (UN PRI), and other certifications such as being a B-Corp, which means a company has voluntarily met certain standards for social and environmental performance.

“We’re clean and green”, “socially responsible” and “investing back into our community” all sounds great… but if the claim ends there, you should be skeptical.

There are few legal definitions of these claims, so companies are free to make them without much backing them.

Those that are actually walking the talk are often eager to show exactly how they’re doing it, with concrete examples of how they’re reducing their pollution, or looking after their workers. It’ll be plastered all over their website, and in their KiwiSaver annual report.

If claims are made in wishy-washy language and without that concrete evidence of how they’re achieving those goals? Red flag.

Just because a fund is labelled as being ethical, doesn’t mean it has the same investments as other ethical investment KiwiSavers.

Some prioritise carbon emissions, others workers’ rights, others animal welfare.

The Mindful Money website is an independent, non-profit that helps narrow down options once you know your concerns.

It lets users enter their own particular ethical concerns, and then ranks options based on how they perform on those specific criteria.

After all, your KiwiSaver fund is your money - and money talks. Make sure you like what it's saying.

Information in this column is general in nature and should not be taken as individual financial advice.