Perhaps a bigger factor in many of our global neighbours' lives though, is the companies in their neighbourhood. Those companies have a big say in the conditions under which our neighbours work, how polluted their local environment is etc. The larger of those companies are generally owned by people in high-income countries, many of whom don't know the first thing about what they get up to. Most of us in high-income countries invest in aggregated funds (which in turn invest in actual companies) meaning that we generally don't even know the names of the companies we part-own. Through these indirect investments many of us are unwittingly benefiting from some pretty dreadful practices.
Fortunately you can avoid this trap by seeking out investment funds that exclude or include companies based on ethical criteria. A while back I blogged about Kiwisaver schemes that do this. Martin and I now have other money to invest and have been investigating what options there are outside the Kiwisaver framework. In priority order, we've been looking for:
- funds that only invest in companies which protect the human rights of people throughout their supply chain. At a minimum we are looking for funds that don't invest in companies that use forced or child labour or buy from those who do; ideally we'd like them to invest in companies that pay a living wage and providing a safe working environment;
- funds that preferentially invest in companies that are making a positive difference in the world (social enterprises, companies that practise in sustainable ways etc.);
- funds that invested in companies in lower-income countries where investment capital is hard to find.
It turns out there's a body called the Responsible Investment Association of Australasia (RIAA). Amongst other things, they certify funds as being 'responsible' and provide a tool where you can filter 'responsible' funds based on the criteria of importance to you. Filtering for funds available to individual investors in New Zealand which exclude labour and human rights violations revealed a number of options :-)
AMP Capital
AMP has five funds certified through the RIAA and available in NZ:
- Responsible Investment Leaders Global Shares Fund
- Responsible Investment Leaders NZ Shares Fund
- Responsible Investment Leaders Conservative Fund
- Responsible Investment Leaders Balanced Fund
- Responsible Investment Leaders Growth Fund
The two 'shares' funds invest only in shares; the others invest in property, infrastructure, commodities etc. as well. Except for the 'NZ Shares' fund they all invest internationally. The 'conservative', 'balanced' and 'growth' funds give you a range of options depending on your investment time frame (the longer till you need your money, the greater the risk you should be able to tolerate). The shares-only funds are considered higher risk (and hence higher potential return) than the other three.
If you're interested in investing in any of them, check out the AMP website.
Pathfinder
Pathfinder have two certified funds:
Note that Pathfinder also offer three other funds that exclude companies involved in armaments, gambling, pornography, fossil fuels and tobacco but which do not exclude companies violating human and labour rights. Please be aware of that if you're investing with Pathfinder!
The two certified funds also invest in more sustainable companies as well as ones where sustainable agriculture or water is their core business. They exclude companies involved in armaments, gambling, pornography, fossil fuels and tobacco.
Both certified Pathfinder funds invest internationally and both invest in a wide range of asset classes (shares, commodities, property etc.). In terms of expected risk/return the Global Responsibility Fund comes in at a 5 on a scale of 1-7 (where 1 is low risk and 7 is high) and the Global Water Fund at a 4, so these won't be good options for investors with relatively short investment time frames.
If you're interested in investing in any of them, check out the Pathfinder website.
Other certified funds
AMP and Pathfinder were the only two companies with RIAA-certified funds that have a base in New Zealand. A number of other companies came up that are based in Australia but have funds open to New Zealand investors. I don't know how investing in Australian funds works either in terms of tax obligations or in terms of hedging your savings should the relative values of the New Zealand and Australian currencies change significantly over time. I suspect the companies will have staff keen to advise you should you be interested, or I presume an investment advisor would know. For ourselves we went NZ-based as it felt simplest, and chose one of the Pathfinder funds as my Kiwisaver is already with AMP. However, should you wish to investigate the Australian options, these are:
- Australian Ethical Investment:
- Advocacy Fund
- Australian Shares Fund
- Balanced Fund
- Diversified Shares Fund
- Emerging Companies Fund
- Fixed Interest Fund
- Income Fund
- International Shares Fund
- BetaShares:
- Morphic Asset Management:
- Pengana Capital:
I am not aware of any other funds that exclude companies that violate human and labour rights. There are a number of funds that use other ethical criteria in their investing (e.g. Southern Pastures, which invests in New Zealand dairy farms and works with them to improve their sustainability or Simplicity, which excludes tobacco companies and certain manufacturers of certain weapons from their investments as well as giving 15% of their profits to charity), but no others that I could find were concerned with worker rights.
Still, between Pathfinder and AMP there are options at a variety of risk levels as well as both diversified funds and those investing only in shares. If you broaden your horizon to include the Australian-based funds it looks like you can also find funds that invest in other asset classes, funds with a range of additional ethical criteria and funds designed to give you a predictable income in retirement. Turns out saving for retirement whilst loving your global neighbours is well and truly possible :-)
Very interesting post! Did you check out this one? https://www.superlife.co.nz/investment/ethical/ethica
ReplyDeleteNever mind; I see you previously blogged about that as it's a Kiwisaver one!
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