The claim is made by Barry Coates, chief executive of Mindful Money.

Coates told Stuff's Esther Taunton that most people do not want to invest in weapons, but KiwiSaver providers do not tell them where their money is directed.

He said that more than $60 million is invested in companies that supply weapons or parts used by the Israeli military.

Research by Mindful Money shows that around $9.3 million of KiwiSaver funds is invested in Boeing, the largest supplier of weapons to Israel.

Boeing supplies missile guidance systems as well as bombs and aircraft to Israel.

Coates says that $9.6 million is invested in Rolls-Royce Holdings which makes engines for Israeli tanks, and $8.1 million in Honeywell which makes components for missiles and drones.

"Where your money is invested has consequences ‒ for people, for workers, for the environment, for climate change."

Coates says that Mindful Money's annual surveys show Kiwi investors want to avoid weapons, human rights violations, animal cruelty, fossil fuels, and social harm from tobacco, alcohol and gambling.

"More KiwiSaver and investment fund managers are saying they are ethical, sustainable or using ESG [environmental, social, and governance] policies" says Coates.

"But the objective test is where they invest our money.

"Investing in weapons companies that profiteer from unjust wars is deeply offensive to most Kiwis."

Coates says that with the availability of more ethical investment options in the last five years, Mindful Money's research shows a huge change in investing choices.

Source

• Stuff

Analysis by ethical investment charity Mindful Money, showed investment in harmful products fell by about $800 million in the six months ended September 2023, to $7.9 billion.

Mindful Money said it was the biggest fall since the charity started to track ethical investment five years ago.

It said until recently, the shift towards ethical investment had come from small and medium-sized funds, including Pathfinder, Medical Assurance Society, Simplicity and Always Ethical.

But in the latest recorded period, major players had significantly cut back on harmful investment. Read more

Coates is CEO of Mindful Money.

Analysis conducted by Mindful Money reveals that of the $98 billion of KiwiSaver investments, a substantial $8.6 billion (8.9%) is now allocated to unethical stocks.

This figure has increased from 7.2% in 2019, marking a concerning uptick.

Coates pointed out that while the recent surge in fossil fuel prices has prompted significant investments in this sector, passive investment strategies and the greater use of external index funds share the blame.

Many passive funds are channelling money into oil and gas companies that are expanding fossil fuel exploration and production.

Mindful Money has categorised fossil fuel companies into those transitioning to renewables, those expanding their fossil fuel operations and those taking no action. Investments in companies transitioning to renewable energy have remained stagnant as a percentage of KiwiSaver.

"One of the biggest investments in this area is Contact Energy, but for other companies on a renewable pathway, it is not significant.

"Meanwhile, investments in expanding companies like Exxon, Chevron, BP and Shell have more than doubled to reach $3.2 billion over the past eighteen months," says Coates.

Greater transparency needed

Despite claims that stewardship and shareholder voting can drive positive change, Coates argues that this approach often lacks credibility.

He acknowledges that increasing efforts in screening and engagement may result in higher fees.

The issue, however, isn't solely about active versus passive management.

Coates emphasises the importance of the type of passive investment, with some index providers offering stronger exclusions.

Beyond fossil fuels, KiwiSaver investments include

• $2 billion in companies that test products on animals for reasons other than human health,
• $1.4 billion in companies breaching human rights, and
• over $1 billion in companies causing social harm such as alcohol, pornography, gambling and tobacco.

It is now eight years since there was a public outcry over the amount of KiwiSaver funds in tobacco.

The latest data shows an annual growth of 50% in investments in tobacco companies such as Philip Morris, British American Tobacco and Imperial Brands, to more than $21 million.

Coates is calling for greater transparency within KiwiSaver schemes.

He is urging providers to disclose the full list of invested companies, especially those that might concern the public.

While other consumer product industries are aware of their customers' concerns, he says the investment sector appears to be an outlier.

A recent survey found that 74% of New Zealanders expect their money to be managed ethically and responsibly.

"The issue for financial advisers and fund managers is who's going to listen to the clients?

"There is evidence that clients don't always raise it proactively in meetings with their advisers but if and when it is raised they have very strong views.

"It's an age of climate change, and investment has a huge role to play, but somehow advisers and fund managers are carrying on as if there is no link," Coates suggests.

Sources

Good Returns

Interest

CathNews New Zealand

It seems many are being misled by fund managers who are doing just the opposite, Mindful Money research has found.

The not-for-profit group researches investment providers and helps consumers understand where their money is being invested. It has just completed a study of 800 or so investment funds. Around half were KiwiSaver.

The research discovered some $11 billion were "unethical investments" in business involving fossil fuels, animal testing, alcohol production and questionable human rights practices.

Mindful Money's founder and chief executive Barry Coates (pictured) said the trend is completely at odds with overwhelming demand for ethical investing.

He's questioning the broad industry claims of embracing the "ethical" trend.

"The latest trends in New Zealand investment are worrying. Instead of moving towards net zero by reducing the fossil fuel companies in their portfolios, fund managers have doubled down and invested far more.

"Instead of making empty promises about being ethical and responsible, fund managers need to walk the talk and back up their rhetoric with the reality of their portfolio holdings."

Last month the Financial Markets Authority warned it would be cracking down on greenwashing - making investments seem ethically sound.

The Mindful Money survey showed:

• a 64 percent increase in the amount invested in fossil fuel companies, which reflects the sharp rise in global fuel prices
• a double-digit increase in funds in companies which use animals for testing
• a 25 percent rise in the amount invested in alcohol producers

Coates said KiwiSaver and other New Zealand investment funds might not be fully aware the investments have been moved. They either contract the funds' management to overseas third party managers or invest it in passive funds that automatically track various indices, he explained.

He stopped short of accusing the investment industry of deliberately lying to consumers.

"This does look like it's misleading information. Many of the funds say they engage with the companies to improve their performance but we see very few details of that happening."

Mindful Money won't name the companies involved, but Coates says they will be asking them for more information and explanations.

If investors changed investment providers it might send a message about unethical investment funds, but on its own this won't be enough, Coates suggests.

He thinks stronger measures are needed, for example official regulation and enforcement from the likes of the Financial Markets Authority to bring about change.

"KiwiSaver providers should have an obligation to tell the public about what they are doing with regard to reducing their harmful impacts on the climate, the environment and society, as well as their investments in positive benefits," he says.

"Reporting should be consistent and comparable, using clear standards, as there are for reporting on financial issues like fees, returns and benchmarks."

Source

• Barry Coates