New Zealand’s newest KiwiSaver provider is calling on the rest of the industry to adopt standard responsible investing protocols.
KiwiSaver investments have been in the spotlight over recent days after a political outcry over revelations that some default funds are invested in companies making bombs and land mines.
Sam Stubbs, of new KiwiSaver provider Simplicity, said it would make sense for the whole industry to follow the NZ Super Fund’s policy on responsible investment.
The fund has an extensive responsible investing programme, including exclusions for companies involved in the manufacture of cluster munitions, manufacture or testing of nuclear explosives, anit-personnel mines, tobacco or whale meat.
Stubbs said it was an elegant solution that was already set up and ready to be applied to KiwiSaver, too. “We have a Kiwi solution that is world class,” he said.
Simplicity is to use Vanguard funds for its KiwiSaver investments.
That would breach the NZSF rules in its current form – Grosvenor has had to move to drop its investment in the Vanguard Index Fund because of its exposure to cluster bomb manufacturers.
But Stubbs said it should be straightforward to get other KiwiSaver providers to agree to follow the principles, and they could then go to Vanguard to ask for it to apply the exclusions to investment vehicles used by KiwiSaver providers. Only a small number of shares would need to be excluded, he said.
“I hope they all fall into line,” he said. “I can’t see why you wouldn’t. It’s a very easy way to approach it that would solve the problem in a robust way.”
A University of Auckland researcher, Matheson Russell, has been calling for some time for all default schemes to be invested responsibly.
He said there should be a legislative mandate for all schemes to work to a framework in the same way that the Super Fund did. “There is a history of neglect in this topic and the chickens are coming home to roost as people realise what they are invested in.”
He said it was naive to suggest that investors should pay attention to where their money was going. “We need to be realistic about how much effort people put into it.”
The managed funds industry had changed with the advent of KiwISaver, he said, and was now a much more mainstream product and the expectations on providers should reflect that.
IFA chief executive Fred Dodds said it was not the responsibility of advisers to drill down to the underlying investments of funds. Instead, they would try to get an overall view of what a client would be comfortable with.
“I don’t think it is necessary for advisers to drill down to the specific issues of armaments, alcohol, tobacco, pornography, nuclear Power – that would be a challenging exercise. On the basis that an adviser’s role is to determine the requirements of a client then I would imagine many advisers would have this issue come up in initial discussions around financial goals and educating clients on how to achieve them This would include overviews of different investment types and the issues of responsible and ethical investments.”