New Zealanders aiming to put Kiwisaver funds towards green investments are being kept in the dark according to authorities, with providers doing little to back their claims of sustainability.
Kiwis have invested a total of $91.5 billion in Kiwisaver, spread across more than 350 funds within 40 different schemes.
According to research by the Financial Markets Authority, about two-thirds of investors want their money invested ethically, potentially attracted to funds promoting sustainability.
But the financial authority found that 14 Kiwisaver funds advertising a “sustainable”, “responsible” or “green” investment provided little evidence to support their advertising.
The FMA’s director of investment management Paul Gregory warned providers the law requires that claims like this are backed by evidence easily accessible to investors.
“So if they say that they’re good for the climate, how? If they say that they’re excluding bad things from their portfolio what bad things? How are they doing it? You need specifics and they’re lacking at the moment,” Gregory said.
He warns they’ll prosecute providers they find making misleading claims.
“We have made our expectations very clear. It is very clear the standard of disclosure is not high, it’s also clear from speaking to investors they need a lot of help.
“So from this point, we are done talking and we’re going to start acting.”
And for the environmentally conscious, the sector is a potential minefield.
While the six default Kiwisaver schemes have been banned from investing in fossil fuels, 90% of investors are in non-default schemes.
Barry Coates, founder and chief executive of the charity Mindful Money, says that 7% of that is placed in areas of concern, including fossil fuels or companies known to violate human rights.
“There is no credible way that people can compare across the funds and go ‘ok I like the ethical policies of this fund and I’ll support them.’
“That’s the kind of changes we’d like to see.”
The Mindful Money website provides a detailed breakdown of all the major Kiwisaver funds available in New Zealand, showing investors where their money is going.
To many, Coates said, the information comes as a surprise.
“The most common reaction from people is ‘I didn’t sign up for this, I wasn’t told I would be invested in those companies’.”