You’re the recycling guru, you always have a reusable bag on hand – because, whales! – and you’ve switched to using beeswax wraps for your leftovers.
You use environmentally-friendly cleaning products, choose free-range and organic produce when you can, and you know all the health benefits of kvass, kefir and kimchi. You’ve even tried brewing your own kombucha but just quietly, the scoby was just a bit too freaky, right?
You’re committed to minimising your ecological footprint and supporting companies that do the same. Making sure that you reduce your impact on the world is important to you. You want your family to grow up in a clean, safe and ethical world.
So how do you apply these environmental and socially-responsible values to your KiwiSaver fund and where it gets invested? Can you even do that?
What is responsible investing?
Responsible investing (RI) is a type of investing that allows your investment choices to align with your values – so you can choose to invest in portfolios that include companies that have a clear focus on environmental or social factors.
Taking a holistic approach, responsible investing looks at all aspects of a company’s performance – including how seriously a company takes its environmental, social and governance (ESG) responsibilities.
Responsible investing does not typically rule out investing in any sector or company – instead, a positive filter is applied. So, you might end up with investments in a large oil company or wine manufacturer, but one that is committed to reducing its environmental impact and pays its workers a living wage.
What about socially responsible investing?
Socially responsible investing (SRI) is a subset of Responsible investing. Rather than applying a positive filter, SRI funds allow investors to exclude investing in specific sectors. This would suit you if you wish to avoid investing in specific areas that are not aligned with your personal values.
SRI funds have an exclusion filter applied. Generally, the exclusion filters will include sectors such as alcohol, tobacco, gambling, and armaments. These SRI funds are available to KiwiSaver members – so you can grow your retirement fund with investments that align with your values.
Not all SRI funds are equal
There are many ways for investment companies to state that they offer socially responsible investment options. Some may apply just one or two exclusion filters; others will have a more robust approach with more exclusion filters applied to their investment funds.
For example, Booster has several SRI funds. Nine screening filters are applied, specifically:
- 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
Socially responsible investment funds aren’t just limited to big-time investors. As a KiwiSaver member, you can also choose to invest your savings in an SRI fund.
More than a label
How can you be certain that you’re investing in an SRI fund that is actually doing what it says on the label? And not just pulling the (green) wool over your eyes?
RIAA* is the certifying body for socially responsible investment funds across New Zealand and Australia. You can be certain it’s a bona fide SRI fund when you see their seal.
Making the world a better place
We understand – you’re a busy person. If the idea of switching your KiwiSaver savings into a socially responsible investment fund appeals to you, it’s super easy to switch. RIAA has a list of certified funds which is a great place to start. Once you’ve chosen one, let that provider know and they will do all the work to make the switch happen. Phew. One less thing to think about.
Now, back to that kombucha…
* The Responsible Investment Association Australasia (RIAA) is the industry body for responsible, ethical and impact fund managers across Australia and New Zealand. Their ethos is to see more capital being invested in sustainable assets and enterprises, with the goal of delivering a healthier economy, society and environment.