The Wise Response Society, which promotes sustainable approaches to climate change challenges, met officials from the Ministry of Business, Innovation and Employment (MBIE) earlier this month about ethical investment practices.
Following that it wrote to the ministry, as well as Prime Minister Jacinda Ardern and Commerce and Consumer Affairs Minister David Clark, stating its concerns with the current focus and restricted number of ethical factors included in KiwiSaver.
The group’s letter, signed by chairwoman Prof Liz Slooten and seen by the Otago Daily Times, listed its concerns about environmental, social and corporate governance (ESG) policies as well as investment in fossil fuel production and illegal weapons.
The majority of ESG policies did not not use validated definitions, it said.
Many ranking methods of ESG companies, such as Morgan Stanley Capital International’s methodology, were “crude and unreliable”.
The requirement that default KiwiSaver funds have an ESG policy on their website was “useless” as there were more than 1700 ESG-related guidelines globally, the letter said.
“If it is a requirement for MBIE to ensure that investors are not misled, MBIE should follow their own advice and not mislead investors,” it said.
Wise Response said it was also concerned about the restrictions on investing in fossil fuel production and illegal weapons and wanted them to include all financial institutions, such as banks.
The group also said it was critical for the MBIE to communicate with the Financial Markets Authority to ensure the “current loopholes” allowing false advertising of investment as ethical and sustainable were closed as soon as possible.
When contacted, MBIE financial markets markets Tom Simcock acknowledged the concerns raised in the letter.
He said that when considering KiwiSaver investment and management requirements, responsible or ethical investment could mean different things to different people.
The adjustments made to default fund settings last year, such as stopping default providers from investing in fossil fuel production and illegal weapons, reflected the Government’s commitment to addressing ethical issues, he said.
In response to queries, Dr Clark said the Government appointed new default KiwiSaver providers last year.
The reason for the ESG policy requirement was allowing people to make informed decisions about providers.
“Government and officials will continue to consider suggestions made by stakeholders for possible improvements to KiwiSaver,” Dr Clark said.