Fund manager launches ethical investment option

The fund will exclude tobacco and controversial weapons. Photo / 123rf

International investment giant Vanguard today announced the launch of an ethical investment fund option which excludes tobacco, controversial weapons and nuclear weapons sectors for New Zealand and Australian investors.

After concern over the issue of controversial investments revealed by the Herald and RNZ this year, Vanguard established the tailored New Zealand-focused fund which was first announced in November.

Titled the Vanguard International Shares Select Exclusions Index Fund, the new option will track the MSCI World index while excluding Australia, tobacco, controversial weapons, and nuclear weapons.

A spokesman for Vanguard said the company had conversations with a "range of New Zealand clients ahead of the fund launch who have indicated that they will invest in the fund".

"Given recent concerns around KiwiSaver funds including investments in weapons companies, we closely consulted with our clients to ensure that this fund meets their needs regarding specific sector exclusions," he said.

Booster Financial Services had provided the major seed investment for the fund with around $400m in assets transferred to the new fund and will be switching all of its KiwiSaver, Superannuation members and investors into the option.

"We have been working closely with Vanguard since August, and the outcome has achieved the desired balance between addressing investor concerns without compromising investor returns," said Booster joint chief executive David Beattie.

KiwiSaver fund Simiplicity, who were on the forefront of actioning the fund, will also be investing 100 per cent of their international shares.

"All available money will go into this. The debate about ethical investments is one that should never end," said Simplicity chief executive Sam Stubbs.

The index option follows an investigation by the Herald and RNZ in August which revealed major New Zealand banks were investing KiwiSaver funds into options which included cluster bombs, tobacco, and nuclear weapons.

•See our Herald Interactive: Dirty secrets of your KiwiSaver

KiwiSaver fund managers had invested $153 million of client funds in stocks blacklisted by the government-run New Zealand Superannuation Fund.

These investments included $43.4m of potentially illegal investments in companies making weapons banned by New Zealand legislation.

Within two months of the August investigation $109m of identified controversial stocks had been dumped by KiwiSaver providers - including 99.9 per cent of investments in the banned weapon-makers - with attention turning how to manage exposure to such firms held indirectly through index investments.

Vanguard Australia head of market strategy, Robin Bowerman, said the fund manager had worked closely with New Zealand clients to offer a solution that met their specific needs.

"Vanguard has been consulting with Booster over the past four months as we developed this fund, and their initial investment supports the product's launch in New Zealand, ultimately offering more choice to investors," Bowerman said.

"This fund includes the key features of all Vanguard funds, offering broad diversification at a low-cost, while also meeting our index construction best practice principles."

Additional reporting from Matt Nippert.