Fossil fuels blacklisted by Government for default KiwiSaver funds

The Government is targeting the fossil fuel indusrtry to address climate change. Photo / File

KiwiSaver default funds will stop investment in fossil fuels to help New Zealand transition to a low emission economy next year, says the Government.

Finance Minister Grant Robertson and Commerce and Consumer Affairs Minister Kris Faafoi said their announcement reflects the Government's commitment to addressing climate change.

The end to investment in fossil fuels applies to the 690,000 people who were automatically enrolled in a default KiwiSaver fund when they started a new job. It does not apply to KiwiSaver providers outside the Government's default providers.

The fossil fuel exclusion follows a similar exclusion on investment in companies involved in illegal weapons like cluster munitions and anti-personnel landmines, which has been in place for several years.

Robertson said the Government is also changing default settings from "conservative" to a "balanced" fund, saying the change is intended to make a real difference to people's financial wellbeing in retirement.

The terms of the nine default providers expire in June next year, when the Government will appoint new providers. The changes are due to come into effect from July next year.

"We're also focusing on ensuring New Zealanders get greater value for money from their fees, which we know can make a big difference in the amount of money people have for their retirement. So the fees each provider charges will be factored into the providers we select during the procurement process," Robertson said.

From next year, default KiwiSaver funds will no longer invest in fossil fuels. Photo / Herald

Faafoi said another key area of focus would be to ensure members have all the information they need to make good decisions about their fund.

Climate Change Minister James Shaw said rules set down by previous governments have allowed New Zealanders' hard-earned money to be used to support fossil fuels companies, which are the leading cause of the climate crisis.

"No New Zealander should have to worry about whether their retirement savings are causing the climate crisis. That's why our Government is moving default KiwiSaver funds away from fossil fuels, putting people and the planet first," Shaw said.

Consumer Affairs Minister Kris Faafoi. Photo / Herald

Faafoi said in 2017, the $47 billion NZ Superannuation Fund adopted a climate change investment strategy that resulted in it removing more than $3 billion worth of stocks that exceed thresholds for either emissions intensity or fossil fuel reserves, without negatively affecting performance.

"So we know that moving away from investments in fossil fuels doesn't have to mean lower returns," he said.