You might take your reusable bags to Countdown, drink your coffee from a keep cup, sort your recycling and reduce your meat intake, but did you know you can also do good by the environment with your investments - including your KiwiSaver?
What is responsible investing? How can you find out where your KiwiSaver money is invested? Is there a trade-off between investing responsibly and good long-term returns?
These are just some of the questions we asked Barry Coates, CEO of Mindful Money, and Shane Solly, Portfolio Manager at Harbour Asset Management.
What is responsible investing?
Responsible investing, which is sometimes often called ethical, sustainable or green investing, is an approach to investing that factors environmental, social and governance (ESG) factors into account when making investment decisions.
Rather than focusing solely on risk and returns, which a more traditional investing approach tends to do, responsible investing also considers the impact that investments have in these areas.
But I'm not an investor - am I?
Even if you don't know a thing about the share market, chances are you are actually an investor!
If you have KiwiSaver, you're an investor.
You might have other investments too in things like managed funds, ETFs, bonds or direct shares in companies.
No matter what you're invested in, you own tiny pieces of companies, Governments and technologies that operate in certain industries and which may or may not align with your values.
How to find out where your money is invested - and does it matter?
If you are interested in making investment choices that align with your values, it's a good idea to find out where your money is invested as a starting point.
Shane says that "the best place to find out about what funds are actually doing is going on the website of the funds you're in, [and] having a look at their funds' disclosure statements."
"The best place to find out about what funds are actually doing is going on the website of the funds you're in, [and] having a look at their funds' disclosure statements."
Portfolio Manager, Harbour Asset Management
His suggestion is to reach out to your fund and ask for information. You should also consider asking your financial adviser to help you with this.
Alternatively, platforms like independent charity Mindful Money do a lot of the work for you in telling you what funds are investing in.
"We exist to help people understand where their money goes and be empowered to make decisions around where their money goes," says Barry.
"What Mindful Money does is we unpick all of the portfolios of all of the KiwiSaver funds and all of the investment funds, not only what they directly invest in but also what they indirectly invest in, and we show it to people on our website."
"And we show it in terms of categories that correspond to things that Kiwis are concerned about... We do the research so that you don't have to."
These issues could be things like:
human rights violations
slave labour in supply chains
animal welfare issues and products tested on animals
One of the great things about investing that Shane sees is that we can all make active choices about what we do with our money, and in doing so have an impact on the world - if that's something that's important to you.
"As a KiwiSaver investor or a funds investor, you can really influence outcomes - not straight away, but over time," he says.
"Decisions have consequences," agrees Barry. "Where you choose to invest your money has an impact on the world."
"Decisions have consequences. Where you choose to invest your money has an impact on the world."
CEO, Mindful Money
What strategies are used to invest responsibly?
Shane outlines three main approaches to responsible investment. Some funds may use a combination of several or all of these strategies:
Exclusion, also known as negative screening, restricts investments into assets and securities considered to be irresponsible.
e.g. Not investing in a business that has a poor environmental practice or contributes to social injustice.
This approach is not new; hundreds of years ago, Quakers refused to support companies who were engaged in the slave trade.
Integration goes a step further than exclusion by directly investing in securities that are improving their ESG rankings and standards, and by working with those issuing the stocks, bonds and so on that people invest in to improve ESG outcomes. As such, "it's a far more active approach than exclusion is", says Shane.
e.g. Investing in a company that is going through an energy transition.
3. Impact investing
Impact investing takes things even further, investing in businesses or entities that generate measurable social or environmental impacts.
This information is general information only. The views and opinions expressed in this video are those of the speakers and do not necessarily reflect those of the FSC. It is not intended to constitute financial advice and does not take your individual circumstances and financial situation into account. We encourage you to seek assistance from a trusted financial adviser or other professional advice.
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