Becoming a sustainable investor with KiwiSaver
Many of us strive to live more sustainably. We take reusable bags to the supermarket, drink our takeaway coffees from reusable cups and check our clothing labels to make sure our garments have been made by a company that values human rights and limits harm to the environment. But what if we could check the label on our investments and make sure our money is being invested in companies who are aiming for and driving change? What is sustainable investing? Spurred on by headlines and shocking environmental and community discoveries about company operations, an increasing number of investors globally have made their voices heard - by considering where they invest their money. Sustainable investing is a growing movement, which considers the impact investments have on the environment and on society. Increasingly, people want to invest in a way that aligns with their values, rather than just on the bottom line, and this grassroots shift in demand has propelled sustainable investing forward into KiwiSaver schemes and Investment funds here in New Zealand. Sustainable Investing is a responsible approach to investing, which factors in people, society and the environment, along with financial performance. A recent survey by the Responsible Investment Association Australasia (RIAA) found 73 percent of Kiwis expect their investments to be ethical or responsible. And that 56 percent of people would consider moving their money if they found out their current fund invested in companies that engage in activities inconsistent with their values. Sustainable Investing goes further than responsible investing by targeting investments in sustainable themes. Sustainable investing in practice But many of us - and especially those whose core investments are with their KiwiSaver accounts - didn't go to business school or have any financial education. Investing terms and concepts like ESG (Environment, Social and Governance) can act as a barrier for many people to understand. BT Funds Management (NZ) Limited (BTNZ) is the investment arm of Westpac in New Zealand and the manager of the Westpac KiwiSaver Scheme. As a New Zealand banking and investment leader, we believe investing sustainably is a powerful way to achieve results both on and off the balance sheet. BTNZ's Sustainable Investment policy sets out how sustainability is embedded into investments decisions and how it goes beyond a responsible investment approach by, for example, actively looking for and investing in companies that are doing good things for the planet, such as adopting solar panels, providing or preventing soil, water and air pollution. Four key pillars that BTNZ outlines as sustainable investing, include: Exclusions BTNZ and its underlying investment managers do not invest in companies that operate outside of its exclusions^ criteria, some of these include controversial weapons, many fossil fuel activities and companies found to operate in contravention of international human, labour and environmental norms. ESG Integration Embedding Environmental, Social and Governance into investment decisions. Stewardship Using influence over investment managers, companies, issuers, policy makers, service providers and other stakeholders to maximise overall long-term value, drive positive change and tackle systemic risks. Sustainable Themes BTNZ is working towards investing more in companies and other issuers that provide or adopt solutions that are in line with its sustainable themes. Climate action is the highest priority and most evolved of the sustainable investment themes. BTNZ is also working to further identify opportunities and grow their investments in biodiversity and ecosystems, water stewardship and pollution prevention and control solutions. Isabel Huther, Sustainable Investment Manager for BTNZ, says excluding companies and countries from an investment portfolio based on what BTNZ is trying to avoid investing in, is just one way of encouraging sustainable practices. However, exclusions are not the only lever. You can also invest more in companies that meet your sustainable investment criteria. For example, in 2023 the Westpac KiwiSaver Scheme invested in companies like Orsted (ranked the world's most sustainable energy company for 2022 in Corporate Knights Global 100 Index) and Calix (an Australian technology company whose products help combat global issues like climate change.) Meeting KiwiSaver investors' expectations A recent Values to Riches survey by the Responsible Investment Association Australasia (RIAA)# shows nearly three-quarters of investors expect their KiwiSaver and investment funds to be invested sustainably. BTNZ believes investing sustainably is a powerful way to achieve results both on and off the balance sheet. For some KiwiSaver providers, considering responsible fund choices is key to meeting customer wishes. Huther, says aligning with a certified body is a key step on the journey to sustainable investing. The Westpac KiwiSaver Scheme is one of a handful of KiwiSaver schemes that has had the majority of its funds* certified by RIAA, she says. RIAA is the longest-running responsible investment certification body in the world and has certified more than 500 providers with assets under management totalling $29trillion. Their mission (as outlined on their website ) is to "promote, advocate for, and support approaches to responsible investment that align capital with achieving a healthy and sustainable society, environment and economy." Kiwis expect scrutiny with investments. Huther says New Zealand has a long and proud history of being closely connected to the land, and the way BTNZ wants to invest customers' money reflects that. "Kiwis are very closely aligned to protecting the planet. We have very clear values about things like climate change, they understand the importance of everyone doing their part to be part of the solution," says Huther. The effect can be cyclical, she says: "When you as an individual choose to invest your money sustainably, it has this wonderful flow on effect, because you will probably influence friends and family to do the same." Returns are still key While a KiwiSaver provider on a sustainable journey contributes to a healthier planet, returns are still key for investors. Investing sustainably matters because BTNZ believes that companies who do this will also perform well financially over the longer term. Huther says: "Environment, social and governance considerations all form part of the overall financial performance of a business." *The Westpac KiwiSaver Scheme Cash Fund is not certified as RIAA does not currently assess cash funds as part of the Certification Program ^ Where an investment is inadvertently made into an excluded company or issuer, divestments are required by the underlying investment manager normally within seven business days, and no later than ten business days. In the event of a breach of the exclusion requirements, the underlying investment managers are required to notify us immediately. For the social safeguards category, we may take additional time to divest #RIAA have certified the funds described above according to the strict operational and disclosure practices required under the Responsible Investment Certification Program. See www.responsiblereturns.com.au for details. The Responsible Investment Certification Program does not constitute financial product advice. Neither the Certification Symbol nor RIAA recommends to any person that any financial product is a suitable investment or that returns are guaranteed. Appropriate professional advice should be sought prior to making an investment decision. RIAA does not hold a Financial Advice Provider licence.BT Funds Management (NZ) Limited (BTNZ) is the scheme provider and issuer, and Westpac New Zealand Limited is a distributor, of the Westpac managed investment schemes referred to above. A product disclosure statement for each scheme is available at westpac.co.nz or free from any Westpac NZ branch. This material is provided for information purposes only and is not a recommendation or opinion in relation to any financial product. Sponsored content