Diana Clement: Are your investments green or just greenwashed?

Make sure your KiwiSaver is doing good for the planet. Photo / Getty Images

Think your KiwiSaver or other investments are sustainable? Think again. Greenwashing is big in NZ.

Greenwashing is unsubstantiated claims to deceive people into believing that a company’s products are environmentally friendly. Just because a KiwiSaver fund, or any other company’s products, claim to be sustainable, green, socially responsible or ethical, there is no guarantee they are. They’re just words.

The dark arts of marketing and advertising are used to greenwash all sorts of goods and services, including KiwiSaver.

It matters. When the Financial Markets Authority (FMA) Te Mana Tātai Hokohoko surveyed New Zealanders last year it found that 68 per cent of us preferred our money to be invested ethically and responsibly. The report went on to find, in my words, that managers fudged the issue of sustainability.

There is no specific regulation around misuse of language, although the fair-dealing provisions of the Financial Markets Conduct Act prohibit false, misleading or unsubstantiated representations. For the most part, the FMA’s role is to coax and guide KiwiSaver providers to review their disclosures in relation to the use of language around sustainability. Of course, companies caught greenwashing may be punished by the court of public opinion.

For now, consumers are confused. Kernel KiwiSaver founder Dean Anderson says the wider industry does need to become more transparent with investors: “Somebody can call the fund sustainable or green and probably find a way to justify that. I have been flagging this through the Financial Services Council and the Boutique Investor Group, which is the non-bank fund manager industry.”

KiwiSaver investors who care about sustainability need to do their own due diligence. Googling the words “sustainable KiwiSaver” doesn’t cut it. That brings back results from virtually every KiwiSaver provider, whether they’re a leader or a laggard.

Some of those search results are from actual ethical/sustainable providers that do what they claim with all or some of their funds, such as Pathfinder, Simplicity, Booster, Mercer, MAS and Kernel. Their sustainable funds aim to do more than simply exclude the worst nasties and tick a box.

But some of the links on the first page of results when I looked were from companies that had either paid Google to appear on that page, or were there solely thanks to the money they spent on search engine optimisation.

One way to do your due diligence is check out Mindfulmoney.nz, which delves deep into sustainability claims. When I checked against Mindfulmoney.nz, some of the KiwiSaver funds that paid to be in the Google results had more than 10 per cent of their investments in adult entertainment, alcohol, animal cruelty, fossil fuels, gambling, genetically modified products, palm oil, tobacco and other less than sustainable industries.

As well as the Mindfulmoney.nz search, readers should also look at Canstar’s ratings of top-performing ethical and sustainable KiwiSaver funds.

There are other things those who want sustainable KiwiSaver funds can do:

• Drill down in disclosure documents to see if there are specific goals such as being “Paris Aligned”. They should have clear targets for reducing carbon emissions or other measurable environmental or social goals.
• Look for third-party certifications such as the Responsible Investment Association Australasia (RIAA) tick. Remember that there is a wide range of funds that are better and worse at sustainability within those who receive a tick. Another way of cracking this same nut is to see if they invest using sustainable indices such as the S&P Dow Jones sustainable indices, which set the rules for what investments are bought. This adds more certainty to the fund doing what it claims.
• Build their own self-select KiwiSaver with Kernel, Craigs, InvestNow, or Sharesies. In each case there are a variety of certified sustainable funds or those that track “Paris Aligned indices” from S&P Dow Jones, which aim to ensure the investment is compatible with a 1.5C global warming climate scenario.

This isn’t a set-and-forget exercise. As Anderson points out, this is a fast-changing area. One of the worst offending KiwiSaver providers last time I looked into this question now has the Responsible Investing Association of Australasia RIAA tick on its funds.