Socially responsible investments

Ethical and socially responsible investing may date back to 1758 when the Quaker Philadelphia yearly meeting prohibited members from participating in the slave trade — buying or selling humans.

John Wesley, one of the founders of Methodism,  outlined his basic tenets for ethical investing in the late 1700s as not harming your neighbour through your business practices and avoiding industries such as tanning and chemical production which can harm the health of workers.

Some of the best-known applications of socially responsible investing were religiously motivated.

Investors were urged to avoid "sinful" companies, such as those associated with products such as guns, liquor and tobacco.

Recently, ethical or socially responsible investing has been associated with strategies seeking to consider both financial returns and social good to bring about social change.

Socially responsible investors encourage corporate practices promoting environmental stewardship, consumer protection, human rights and diversity.

Some avoid businesses involved in alcohol, tobacco, fast food, gambling, pornography, weapons, contraception/abortion, fossil fuel production and/or the military.

Last week, Commerce Minister Paul Goldsmith said in Parliament there were indications several KiwiSaver providers had broken strict laws banning investments in cluster bomb makers.

A newspaper investigation analysed more than 100,000 individual assets held in nearly 500 KiwiSaver funds looking for 169 companies blacklisted by the New Zealand Superannuation Fund.

The analysis found half of KiwiSaver providers — mostly smaller boutique providers — have avoided blacklisted investments, but some people were unwitting investors in big tobacco companies and makers of banned weapons.

It total, New Zealanders were found to have $102 million in tobacco companies, a small proportion of the total amount invested.

The latest KiwiSaver report shows more than $28 billion is invested in KiwiSaver by 2.5 million New Zealanders.

However, although some KiwiSavers take an active interest in their portfolio of investments, many unfortunately opt for a default provider and take no interest other than the updates from their advisers as to how much their investment has grown — or shrunk in a bad year.

The investigation found three KiwiSaver providers have made investments worth a total of $2.3 million in a trio of United States companies blacklisted by the New Zealand Superannuation fund due to their production of cluster bombs.

Although the amount invested is a tiny percentage of  total KiwiSaver funds, it is still unacceptable some funds have broken the law.

The KiwiSaver providers should have been more careful to adhere to the legislation specifically forbidding investments in such companies.

But the rest of the problem becomes murkier.

It is still legal to smoke in New Zealand and there will be some KiwiSaver investors who are relaxed about their funds being invested in tobacco companies.

The Government has rightly said it was unlikely to further regulate the KiwiSaver sector and the choice of the fund — and where to draw lines on what was an acceptable investment —  was up to individuals.

This stance has outraged Opposition MPs who want the Government to step in to tell the funds where they can and cannot invest.

Most KiwiSavers rely on the highest returns available to help fund their retirement yet some politicians want to decide where New Zealanders invest.

The Green Party, in Government, will establish a public, ethical default KiwiSaver fund, something that should be applauded.

But making investors decide where to put their money is unethical.

Currently, about 50% of New Zealand investors hold shares in Australian companies, including mining companies dealing in fossil fuels and extractive industries such as uranium, a key component of nuclear energy generation.

Telling New Zealand KiwiSaver providers where to invest is a thin edge of something rather larger.

Of course, no provider should break the law and, if they do, they should be held to account.

No government has the right to decide whether New Zealanders can invest in liquor or tobacco companies.

It is the individual’s responsibility to ensure they ascertain where their money is invested.

Then, if they are not happy, it is up to the investor alone to take the appropriate action.

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