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New Zealand in responsible investment review of KiwiSaver default funds

Government is reviewing whether to strengthen responsible investment approach

The New Zealand government is reviewing whether to strengthen the responsible investment approach of its automatic enrolment pension system, KiwiSaver default funds.

KiwiSaver schemes, which began a decade ago, manage some NZ$57.2bn (€33bn) in New Zealand workers’ savings, according to data from Morningstar. There are around 20 schemes, nine of which are default funds managing around NZ$9bn, with providers appointed by the government.

The tenure of the nine default fund providers expires in 2021. In advance of this, a government consultation is underway on changes to the system, including on responsible investment.

The consultation asks whether the government should prohibit default funds from investing in particular sectors or industries. It also asks whether they should be required to meet certain certification standards on responsible investment. And it asks whether providers should be required to give members standard information on responsible investment practices.

KiwiSaver default schemes mostly do exclude controversial sectors, due to public pressure, according to the consultation. But it also says that schemes face criticism for doing the minimum on responsible investment and lack transparency on where money is invested.

Speaking to RI, Simon O’Connor, CEO of Responsible Investment Association Australasia (RIAA), says the consultation’s focus on responsible investment comes from public opinion.“It was made abundantly clear by New Zealanders in late 2016 that they were not willing to accept their retirement savings supported harmful activities, after an exposé by journalists as to the exposure of funds in such industries.”

But he says he has concerns that the consultation document “seems persistently fixated on the un-substantiated claims that responsible investment may be detrimental to returns”.

“We will certainly be pointing to the strong evidence that this is well and truly now dis-proven,” he says.

RIAA is mentioned in the government consultation with regards to its responsible investment certification. O’Connor says: “We are encouraging the government to look to our experience from our certification programme to guide the approach taken, and to look beyond merely exclusions to other forms of active ownership in responsible investment.”

Default fund providers Kiwi Wealth, Mercer and Booster have all their KiwiSaver schemes certified by RIAA. Booster offers SRI options as part of its KiwiSaver scheme range, as does default provider AMP, which offers a responsible investment option for its 228,000 customers. Some 293 clients are in the responsible option, which has a value of NZ$6.1m.

Three of the nine default KiwiSaver providers are members of the Principles for Responsible Investment (PRI).

They are: ANZ New Zealand Investments, which is the market leader with NZ$13.4bn under management; ASB Group Investments and Fisher Funds Management.

Australia’s AMP Capital and US-based Mercer, which provide default funds, are also PRI signatories. New Zealand has 27 PRI signatories in total.