Best Ethical KiwiSaver Funds in NZ – A Guide for 2024

When you want your investments to align with your values, you might consider an ethical KiwiSaver fund. These funds avoid industries like weapons, fossil fuels, and animal testing and offer a way to invest responsibly without compromising potential returns.

Despite being relatively new, ethical KiwiSaver funds have shown promising returns, often comparable to traditional growth funds. With several options available, you can find a fund that matches your ethical standards and financial goals.

As always, our expert KiwiSaver advisers are here to help you choose the right KiwiSaver provider to ensure your investments align with your values, while also growing your nest egg. Talk to us today, our advice is obligation free and at no cost to you.

What is Ethical Investing?

Ethical investing focuses on making financial decisions that seek profit and consider the environmental, social, and governance (ESG) impacts of investments. This approach allows you to align your money with your values, investing in companies that promote positive change.

The three principles of ethical investing are:

Environmental: Factors include a company’s impact on nature, their carbon footprint, waste management, and energy use. Companies that work on renewable energy and sustainable practices are often favoured.

Social: Factors cover how a company manages relationships with employees, suppliers, customers, and communities. This includes fair labour practices, community engagement, and diversity initiatives.

Governance: Looks at how a company is managed. Issues like board diversity, executive pay, and shareholder rights are key. Good governance ensures transparency, accountability, and long-term sustainability.

Ethical investing has a long history, with notable movements like the divestment from companies using sweatshop labour and those involved in animal cruelty. Fund providers focus on investments that align with ethical standards and socially responsible investment practices.

It excludes certain companies, industries, or business practices, including:

• fossil fuels
• nuclear power
• military weapons, war, and conflict
• civilian firearms
• tobacco
• alcohol
• gambling
• adult entertainment
• animal cruelty and animal welfare issues
• human rights violations
• social harm
• deforestation and environmental damage
• labour rights violations

There is a shift among KiwiSaver providers to align their portfolios with social responsibility. This has led to a drop in tobacco investments by 72%, and weapons by 35% as reported by the OECG (Organisation for Economic Co-operation and Development).

A Largely Unregulated Area in NZ

The surge in demand for ethical investment options has highlighted a regulatory gap, however. Unfortunately, New Zealand lacks specific standards for this, with words like “socially responsible,” “positive impact,” and “sustainable investing” being thrown around, ultimately leading to confusion among consumers.

There is increasing pressure on the government to establish standards for ethical investing. However, a fund can be considered “ethical” while still investing in companies that test on animals, build machinery used in wars, or produce highly hazardous pesticides.

Investing with an ethical KiwiSaver provider allows New Zealanders to choose managed fund options that impact the world positively, without sacrificing growth. This ensures your money supports positive change. Types of investments, or companies invested in, may include:

• renewable energy
• climate change
• reducing carbon emissions
• green technology
• sustainable agriculture
• global health initiatives
• education
• social inclusion
• corporate governance, data privacy, and security

Mindful Money offers insights into the ethical ratings of various KiwiSaver funds, and are a wealth of information when it comes to comparing ethical KiwiSaver schemes.

Top Ethical KiwiSaver Providers in New Zealand

Ethical KiwiSaver providers can be segmented into several different categories. There are those that are approved as “ethical” but still may have small investments in areas you may not agree with.

An example of this is investments in:

• Meta Platforms Inc-Class A (0.92% of the fund): Flagged for human rights violations due to privacy-related issues, poor governance, and the platform being used to incite ethnic violence in some countries.
• Johnson & Johnson (0.35% of the fund): Cited for human rights violations related to the quality and safety of several of its products across its business segments, with some products allegedly causing severe or fatal adverse impacts on patients.
• Caterpillar Inc (0.17% of the fund): Flagged for human rights violations due to its equipment being used in the destruction of Palestinian homes in occupied territories.

These are actual investments from an ethical KiwiSaver fund. I haven’t named the fund as I don’t want to invoke bias, and the investment percentages are tiny. It’s up to you to decide whether some investment is okay or not.

To help you further define ethical KiwiSaver providers, we’ve broken down the fund choices by specific investment types:

Those Against Animal Cruelty

• ASB Positive Impact Fund
• InvestNow – With 4 different investment options
• NZ Funds – balanced and inflation strategy options
• OneAnswer Australasian Share Fund
• Pathfinder KiwiSaver Growth Fund and Balanced Funds
• Quaystreet Australian Equity Fund
• Summer Australian Equities
• Superlife Australian Dividend Fund

No Weapons Policy Funds

• AE KiwiSaver Plan
• Booster Socially Responsible Balanced Fund and Growth Funds
• Christian KiwiSaver
• Fisher Funds Two Growth Fund
• InvestNow has 5 different options for weapons-free investing
• Kernel KiwiSaver has 4 different options available that exclude weapons
• Global ESG (NZD Hedged) Fund
• Kiwi Wealth Default
• Koura KiwiSaver Clean Energy Fund
• Maritime KiwiSaver – both growth and balanced portfolios
• Mercer Sustainable Plus – Both balanced and growth
• Nikko AM Ark Disruptive Innovation Fund
• NZ Funds has two options, balanced and inflation strategy
• OneAnswer Sustainable International Share Fund
• Pathfinder KiwiSaver Growth Fund and balanced fund options
• QuayStreet has two choices available
• Select KiwiSaver Growth Fund
• Sharesies Pathfinder Ethical Growth Fund
• Supereasy has six choices available from balanced through to aggressive, and age based funds
• Superlife has two choices

Providers Focused on Environmental Impact

• AE KiwiSaver Plan
• Kernel KiwiSaver has three choices available
• Koura KiwiSaver NZ Equities Fund
• Nikko AM has two choices available
• NZ Funds Balanced Fund
• Pathfinder Balanced and Growth Funds
• InvestNow has two choices available
• QuayStreet Socially Responsible Investment Fund
• Sharesies Pathfinder Ethical Growth Fund

Civil Rights Supporters

• AE KiwiSaver Plan
• ASB Positive Impact Fund
• InvestNow
• Kernel
• Koura
• NZ Funds
• OneAnswer Australasian Share Fund
• QuayStreet
• Superlife Australian Mid Cap Fund

Socially Responsible Schemes

• AE KiwiSaver Plan
• ASB Positive Impact Fund
• Aurora Balanced and Retirement Plus
• Booster has 4 choices including their Socially Responsible Balanced Fund
• InvestNow has 4 choices also
• Juno
• Kernel
• Koura
• Lifestages
• Nikko
• NZ Funds has six different options
• Pathfinder
• QuayStreet
• Sharesies
• Superlife

A Closer Look at Top Performing Providers

Pathfinder

Pathfinder stands out among ethical KiwiSaver providers due to its comprehensive dedication to socially responsible investment. They rate all investments on environmental, social, and governance (ESG) metrics. They avoid sectors like animal testing, factory farming, and companies without female board members. Exploitative supply chain behaviour is not tolerated.

Pathfinder has shown strong performance in recent years. Pathfinder’s top three funds have been top performers in the past 12 months, with its signature Growth fund returning 31.8% over that period. However, it’s important to remember that past performance does not guarantee future results.

Management fees:

Pathfinder charges the following annual management fees for its KiwiSaver funds:

1. Conservative Fund: 0.84% per annum
2. Balanced Fund: 1.14% per annum
3. Growth Fund: 1.29% per annum

In addition to these management fees, there is a $27 annual membership fee for all Pathfinder KiwiSaver plans.

Pathfinder’s KiwiSaver Growth Fund invests primarily in growth assets while adhering to ethical standards, with notable investments in companies like Microsoft and Oceania Healthcare.

The company measures and manages the carbon intensity of its portfolios, aiming to keep it 80% below market levels, demonstrating a strong commitment to tackling climate change.

Pathfinder previously donated 20% of its management fees to partner charities, allowing investors to support well-known organisations, aligning investments with personal values. As of April 1, 2024, Pathfinder has updated its charitable giving policy. They now donate 1% of revenue from across their entire business, including all retail managed funds and KiwiSaver funds.

Recognised by the Responsible Investments Association Australasia (RIAA) and a member of the Investor Group on Climate Change, Pathfinder employs both negative and positive screening in its investment approach, actively seeking companies that make a positive impact.

Booster Socially Responsible Investments (Booster SRI)

Booster has 5 different socially responsible options, with the Socially Responsible Investment (SRI) High Growth Fund is a standout among ethical KiwiSaver funds in New Zealand. It focuses on growth assets while excluding industries like fossil fuels, adult entertainment, alcohol, and gambling.

The fund prioritises ethical investments by supporting reputable companies such as Microsoft, Fisher & Paykel Healthcare, Vanguard International Property Fund, and Auckland International Airport, ensuring strong ethical practices and long-term growth potential.

Management fees range between 1.09% and 1.75%, in addition to standard member fees of $36 per annum. The Booster SRI fund achieved a five-year return of 10.30% as of 31 March 2024 indicating solid performance.

The fund meets Mindful Money criteria by avoiding companies involved in military weapons, nuclear power, and animal testing, aligning with the values of many New Zealanders seeking responsible investments.

Booster’s consistent exclusion of industries counter to responsible investment values underscores its dedication to ethical standards and strong financial returns.

MAS

MAS offers ethical KiwiSaver funds with a commitment to responsible investment practices certified by the Responsible Investment Association Australasia (RIAA). This certification assures you that your money is channelled to companies acting in society’s and the planet’s best interests.

MAS Aggressive Growth Fund focuses on growth shares, with a portfolio consisting of 85% growth assets and 14% fixed interest.

This fund invests in companies like Microsoft, Infratil, Fisher & Paykel Healthcare, Meridian Energy, and Mainfreight. Its responsible investing policy limits exposure to industries such as fossil fuels, military weapons, and adult entertainment. The key here is “limits”, which doesn’t mean it doesn’t invest in these areas at all.

Their Responsible Investment Policy includes assessing companies based on ESG (Environmental, Social, Governance) practices, and actively participating in shareholder voting to drive positive change.

MAS KiwiSaver funds balance low fees with robust investment performance. The MAS Aggressive Growth Fund charges a management fee of 0.99% per annum, competitive among New Zealand KiwiSaver providers with an ethical focus.

With a solid track record and a commitment to sustainable practices, MAS was one of four finalists at the Mindful Money Ethical and Impact Investment Awards in 2024. While they lost out to Pathfinder, MAS is still a provider to consider if you are seeking long-term investment returns.

Simplicity KiwiSaver

Simplicity’s Growth Fund stands out among ethical KiwiSaver funds due to its low management fees and assertive investment policy. It charges just 0.31% per annum. As of 31 March 2024, the fund posted a five-year return of 7.41%, making it a cost-effective and high-performing option.

The Growth Fund focuses on leading growth companies and avoids fossil fuel companies, adult entertainment, and nuclear weapons. It also invests in Vanguard Ethically Conscious funds and companies like Ryman Healthcare, Meridian Energy, and Fisher & Paykel Healthcare. This aligns the fund with ethical standards while supporting long-term financial returns.

Simplicity KiwiSaver aims to balance low cost with socially responsible investments. Their portfolio includes growth and income assets, allowing diverse investment strategies without compromising ethical values.

Investments are consistent with policies on human rights and climate change, ensuring your KiwiSaver savings support a better future. Every investment decision aims to align with personal values, providing peace of mind for long-term goals like first home withdrawals or retirement savings.

Simplicity’s investment approach excludes any company involved in activities harmful to society or the environment, such as fossil fuels, nuclear power, and animal cruelty. This approach ensures that your investments contribute positively to the world. Each fund within Simplicity KiwiSaver adheres to responsible investing guidelines, focusing on ethical returns while maintaining strong performance.

When choosing Simplicity, you access a Product Disclosure Statement (PDS) detailing all aspects of your KiwiSaver investment. This document helps you make informed investment decisions, clarifying the fund’s strategy, asset classes, and ethical exclusions.

Key Terms to Understand When it Comes to Ethical Investing

Ethical Investment

Ethical investment involves choosing investment funds that align with your moral and ethical beliefs.

Socially Responsible Investment (SRI)

SRI stands for Socially Responsible Investment. Fund managers look at companies’ environmental, social, and governance (ESG) practices to ensure they meet high ethical standards. Investment decisions consider factors like climate change, human rights, and fair labour practices.

ESG Criteria

ESG stands for Environmental, Social, and Governance. These criteria help you evaluate companies’ ethical performance. For example, environmental criteria consider a company’s impact on the planet, including renewable energy adoption and carbon footprint. Social criteria look at human rights, employee relations, and community impact. Governance criteria assess a company’s leadership, executive pay, and shareholder rights.

Mindful Money

Mindful Money is a tool that helps you assess whether your investments in KiwiSaver funds align with your ethical and financial goals. It evaluates funds on various responsible investment metrics, making your ethical KiwiSaver investment decisions easier.

Investment Returns

Investment returns represent the gains or losses generated by your investment funds over a specific period. In ethical investing, you focus on financial returns and positive societal and environmental impacts. Some ethical funds might offer slightly lower returns compared to traditional funds, but they align with your personal values.

Product Disclosure Statement (PDS)

A Product Disclosure Statement (PDS) provides detailed information about an investment fund, including its objectives, fees associated with their financial products, risks, and returns. Reviewing the PDS ensures you understand what you’re investing in and how it aligns with your standards.

Fund Managers

Fund managers are professionals who manage investment funds by selecting companies that meet specific ethical criteria. They align the fund’s portfolio with socially responsible investment goals.

Financial Advice

Consulting a financial adviser helps tailor your KiwiSaver investment approach to your financial and ethical objectives. At OneStop Financial Solutions, we provide personalised financial advice, guide you through various investment options and ensure your portfolio aligns with your values.

How Do I Choose An Ethical KiwiSaver Provider?

Consider the following when choosing where you want to keep your KiwiSaver money and how to get the most out of your KiwiSaver contributions:

• Define personal values and goals for your money.
• Research fund managers’ experience in ethical investment.
• Understand the screening criteria each fund uses.
• Compare fees and performance of different funds.
• Use authoritative sources like Mindful Money to evaluate ethical standards.
• Review the Product Disclosure Statement (PDS) for detailed information.
• Seek financial advice from one of our helpful KiwiSaver advisers to align your ethical and financial objectives.

Frequently Asked Questions