Investments that support human rights

I've written a lot over the years about shopping for human rights.  How we buy creates the world in which our global neighbours live, so being mindful in this area is an important means to love our neighbours.

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:

1. 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;
2. funds that preferentially invest in companies that are making a positive difference in the world (social enterprises, companies that practise in sustainable ways etc.);
3. funds that invested in companies in lower-income countries where investment capital is hard to find.

Do such funds exist?  Yes!  We couldn't find any funds that met all three criteria, but there are a number doing the first two :-)

Update to Ethical Kiwisaver post

I've just updated my Ethical Kiwisaver post to include Koinonia.  It wasn't in the original post as it's a restricted scheme.  However, since that was written, it's become a lot less restricted, moving from being open only to clergy to being open to anyone who self-identifies as Christian.  Read the new version here.

Alternate banking

Over Lent, Martin and I have been doing a study series called the Household Covenant.  It looks at seven areas of daily life (work and leisure, consumption, giving etc.) and considers what the Bible has to say.  You are then asked to make a commitment to change one thing in each area over the next 12 months.

Last week's topic was 'savings and investment'.  In considering our commitment, we looked at what types of savings and investments we currently have.  These are:

1. money for day-to-day use (currently with the ASB)
2. medium-term savings for emergencies and replacement of larger assets (these were with Prometheus, a non-bank deposit taker that invested in environmental and social projects, but are currently with the ASB and the receivers as Prometheus has recently gone into receivership)
3. Kiwisaver (currently with SuperLife Ethica and Grosvenor Growth SRI)

From early next year we also expect to start to accumulate retirement savings.

We are comfortable with the ethics of our Kiwisaver funds, having examined this in some detail last year.  We don't think it matters too much where we put our money for day-to-day use: the sums are too small to be very important.  So our commitment from the study was to find somewhere to put our medium-term savings where they would at least do no harm, and hopefully do some good.

To do this, we looked at what alternatives to regular banks (including the New Zealand-owned banks*) are available.  I've listed out what I've found below, so that you can make use of the work I've done if you'd like.

* You can do things that aren't pro-social in New Zealand just as well as in Australia, so just being NZ-owned isn't good enough :-)

Building societies

These are organisations that are owned by their members, and the money in them is only loaned to members, not to businesses.  They offer all the normal banking services, so if we put our medium-term money with them we'd be looking at savings accounts and term deposits.

The core business of building societies is mortgages: I'm not really interested in funding the housing market (although I acknowledge people need somewhere to live), so we probably won't be going with one of these.  If you are interested in doing so, however, the dominant building society in New Zealand appears to be SBS.

Co-operative banks, mutual societies and credit unions

The differences between these are beyond me!  They are all owned by their members and loan money exclusively to them.  Often they have a regional focus.  They do all the normal banking services (although not all offer mortgages), and seem to be a little less secure and a lot more friendly than a regular bank.

In general I'm not hugely interested in these - they seem like a good 'do no harm' option, but not necessarily an option that does a lot of good.  The one that stood out to me was Westforce: they focus on West and South Auckland and Whangarei, so may be worth investing in as a way to provide liquidity into relatively poor areas or New Zealand.

Other credit unions and co-operatives are listed below.  I think this is a comprehensive list of all such organisations that have open membership:

• New Zealand Credit Union South
• New Zealand Credit Union Auckland
• New Zealand Credit Union Baywide
• New Zealand Credit Union Steelsands
• United Credit Union
• Aotearoa Credit Union
• Credit Union Central
• Manchester Unity
• The Co-operative Bank
• First Credit Union

Community banks

Community banks have ownership vested in a community trust so their profits go to community projects.  The only one in New Zealand appears to be TSB, which distributes funds in Taranaki.

Other non-bank deposit takers

Non-bank deposit takers seems to encompass a wide range of institutions.  A full list of them is available here.  Three were of interest to me:

1. NZ Bible Society.  They offer term deposits.  The profits they make on this money is used to fund their work of translating, publishing and distributing Bibles.
2. Baptist Savings.  They offer term deposits and on-call funds.  They use this money to provide loans to Baptist and Presbyterian churches.  I'm slightly leery of this as I suspect that most loans are used to fund buildings and I'm a bit sceptical of the need for buildings.
3. Quaker Investement Ethical Fund (QIET).  They offer 6-month term deposits, after which funds are available on-call.  They loan this money to "ethical" businesses (they've long supported TradeAid), to small environmental projects and to people suffering financial hardship.  They offer a range of interest rates so you can choose a below-market one if you want - this enables them to make below-market-rate loans.

Other options

A few other banks stood out to me.

Firstly, RabobankDirect.  They invest exclusively in New Zealand agrigulcuture. I think NZ doing agriculture well is important for the world (as we're land and water rich and the world needs lots of food), but I'd like to know more about quite what they invest in: if it's mostly dairy conversions then I'm not interested.

Also, two of India's 'big four' banks have a presence here: Bank of India and Bank of Baroda.  As these banks are state-owned, their profits go to the Indian government.  Could investing with them be a way of helping development in India?

Final comment

In the process of doing this, I learned that three of the ethical Kiwisaver Funds I looked at earlier (SuperLife Ethica, Craigs Investment Partners SRI Fund and Amanah) can also be invested in outside of the Kiwisaver scheme.  We will consider these next year when we decide where to put our retirement savings, along with seeing what else might be available.

Growing in Faith vs Dramatic Gestures

This is a follow-up from Heather's two posts about retirement savings:  should we prudently save for our retirement or generously give to today's needs and trust God to look after us down the road.

Giving away our retirement savings would be a bold statement, but requires little faith for the present day.  How can it grow on experiences of God's provision when we have arranged not to need His help until we turn 65?

I was struck by this question a few weeks back, as we yet again tossed around our questions.

I can't remember if it was before or after the 150th anniversary celebrations for my parents' mission organisation, whose founder's belief that "God's work... will not lack God's supply" was affirmed by stories of those still present as well as from history books.  Those stories were of people daring to act as God led them, facing pressing need, and being encouraged by timely provision of those needs.

So I think that we'll keep putting the savings aside for now, and fund our giving from today's grocery money.  Then we can see God at work today, and see where things go.  We won't need to reach for the piggy bank unless there's something pretty exciting afoot, at which point our questions would look very different.

Retirement savings, part two

This is a follow-up to a previous post, in which I was wondering whether we should give away the money we had intended to save for our retirement, rather than keep it.

The more I have been thinking about whether we should give our money away, rather than save for our retirement, the more Biblical passages come to mind in support of the idea.

I think about the man who built bigger barns and then died before he could use the produce in them (Luke 12:13-21): are we, like him, storing up treasure for ourselves rather than being rich towards God?

Then last week I came across Proverbs 30:7-9:

Two things I ask of you;
    do not deny them to me before I die:
Remove far from me falsehood and lying;
    give me neither poverty nor riches;
    feed me with the food that I need,
or I shall be full, and deny you,
    and say, “Who is the Lord?”
or I shall be poor, and steal,
    and profane the name of my God.

I felt convicted by it as I know that our wealth makes our need to depend on God less obvious to us.  We depend on our resources instead, and in practise then often live as if He doesn't exist.

Last week I also read Matthew 6:25-34, where Jesus says:

do not worry, saying, ‘What will we eat?’ or ‘What will we drink?’ or ‘What will we wear?’ For it is the Gentiles who strive for all these things; and indeed your heavenly Father knows that you need all these things.  But strive first for the kingdom of God and his righteousness, and all these things will be given to you as well.

What is retirement saving if it isn't worrying about what we will eat, drink and wear in the future?  And doesn't holding those resources for the future prevent us from using them to strive for the kind of world God wants in the present?

In addition, when Martin and I read Luke a couple of years back, we were both struck by how dismissive it is of money.  I'd always been puzzled by the passage where Jesus says to give to Caesar what is Caesar's and to give to God what is God's (Luke 20:20-26).  However, when we read it after reading all the rest of Luke that comes before it, it seemed obvious: Jesus is saying 'if Caesar wants money - give it to him!'.  Money is of very little importance, so why fuss if Caesar wants it?  I blogged about it at the time, here.  Since then, I've wondered a bit about our careful budgeting.  By really planning how we spend our money, we've been able to live frugally and give a fair bit away - but it also means that we think a lot about money, and I've wondered whether that means we're giving it too much importance.  I've now started to wonder whether carefully saving for retirement is also giving money undue importance.

Lastly, throughout the Old Testament, one of the main things the Israelites do that makes God angry is turning to things other than Himself for security: foreign gods/idols, their own military strength, alliances with stronger nations or whatever.  This has long given both Martin and myself pause when it comes to insurance.  It seems only sensible to have it (especially with my medical situation), but in so doing we are turning to something other than God for our security.  Now I'm wondering about whether it's appropriate for us to save for retirement, as well.  After all, that's turning to our own efforts to ensure our security, rather than depending on God.


So, that's 'the case for'.  What about the case against?

The first thing I thought of was the phrase "be wise as serpents but innocent as doves".  Surely what we're thinking of isn't wise?  But, when I looked it up, it turned out that Jesus said it when he was talking to the disciples about how to respond to persecution: that didn't seem very relevant.

One that seemed to have a bit more weight was the description of a 'capable wife' in Proverbs 31.  In verse 25 it says that she's such a successful merchant that she 'laughs at the time to come'.  She's clearly stashed resources aside for the future, and she seems to described as someone to be admired, so doing so can't always be bad.

Another passage that gives me pause is Luke 4:9-12.  When Jesus is being tested by the devil in the dessert, he tells Jesus to throw himself off a high tower: he'd be OK because God would rescue him.  Jesus responds by saying that you shouldn't put God to the test.  The text he quotes, Deuteronomy 6:16, doesn't really seem to be about forcing God to rescue you (it's more about forcing God to get angry by disobeying Him) but the way Jesus uses it does give me some caution about deliberately putting myself/ourselves in a position where we are relying on God in a way that we wouldn't otherwise have had to.  That doesn't totally put me off the idea, though: it just means that we need to do it whilst accepting that we may end up very poor indeed in old age, rather than do it assuming God will sort us out.


The more I think about this, the more it just feels like the right thing to do.  It feels very wrong, in that it's so clearly irresponsible, but it feels like what we should do all the same.  This internal conviction seems to be confirmed by what I read in the Bible.

It also feels very scary.  This has revealed to me that I don't really believe in my gut that God will provide for us.  I think that that's partly a healthy reaction against the 'prosperity gospel', but mostly a simple lack of faith.  I personally know people who have stepped away from cultural norms and impoverished themselves who have then miraculously been provided for, but it still feels impossible to me that this would happen to us.  Since I realised this, I have been praying for an increase of faith!  After all, God 'owns the cattle on a thousand hills' - he has unimaginable unlimited resources, so He is certainly capable of caring for us....  That doesn't mean He will - Christians starve to death every day, after all - but it does mean that He could.

Social support for the elderly vs. social support for the infirm

In recent days I've had cause to spend some time on the WINZ website.  Whilst there, I was confronted with something I've been shocked by before:

1. A married couple who both have health conditions that render them permanently unable to work, but who happen to be under the age of 65, will be given $558.26 to live on by the government;
2. A married couple who are fit and healthy but happen to be aged 65 or older, will be given $638.46 per week to live on.

Around $80 a week is a big difference.

If the older couple have health problems of their own, the discrepancy becomes greater:

1. A married couple who both have health conditions that render them permanently unable to work, but who happen to be under the age of 65, will be given $558.26 to live on;
2. A married couple who both have health conditions that render them permanently incapacitated, but who happen to be aged 65 or over, will be given up to $761.22 to live on.

Around $200 a week is a huge difference!

Similarly, if the two couples needed assistance with housing costs, the help offered to the older couple would be a lot more generous than that offered to the infirm couple.

The data I'm working from is all on this pdf.

Note that benefits for people with permanent health conditions are known as "Supported Living Payments" these days, not Invalids Benefits).

This seems to me blatantly unjust.  I'm OK with the unemployment benefit (known these days as "Jobseeker Support") being at a lower rate than Superannuation: you're not expected to be unemployed for the rest of your life so it's not so important that it's at a long-term liveable rate.  But I'm not OK with those who are unable to work being treated worse than those who are simply old.  After all, the only reason we give financial support to older people is because we consider them too old to be able to work!

What would I like to see done?

I'd like these Superannuation and Supported Living Payments to be set at the same level.  People who won't be able to work again for the rest of their lives and people who are too old to work again have the same needs and so should receive the same support.  I don't hugely mind which level the two benefits are set at (i.e. at the current rate of Super, the current rate of the Supported Living Allowance or somewhere in between), but I strongly feel the rate should be the same.

If it's considered politically impossible to lower the rate of Super then this proposal would increase the government's costs.  In that case, I'd propose raising the age of entitlement to Super to 70 (in order to make the change fiscally neutral) but with one proviso.  Anyone aged between 65 and 70 who was assessed as unfit to work due to their physical or mental health, and who is assessed as being likely to stay that way for at least 6 months, would receive a Supported Living Payment.  Once assessed as eligible, they would remain eligible until they turned 70, without periodic reviews.  This would mean that, in effect, between the ages of 65 and 70 Super would be needs-assessed, and from the age of 70 it would be a universal entitlement.

Why?  With increasing life expectancies, many people are staying healthy and able to work well past 65.  It makes sense to me to increase the age at which we say that you are probably no longer fit to work in order to give money to those who have actually been assessed unfit to work.  However, some people (e.g. people who've done physical work like shearing or people who just have bad genes) get 'old' at a much younger age.  It seems harsh to force those people to either continue trying to work or to perpetually prove their incapacity once they've demonstrated their working days are done.  Not requiring regular reviews would also save money, and I doubt it would result in many people fraudulently receiving this special Supported Living Allowance at any time as you could only receive it for a maximum of 5 years anyway.

If life expectancy continues to increase, I'd want to periodically increase the cut-offs for eligibility both for Super and for this special Supported Living Allowance.

I'm not sure what to do with my idea.  Does anyone know?  I know that John Key has emphatically stated that he's not going to increase the age of entitlement to Super so long as he's Prime Minister, plus his government has really tightened up entitlement to other benefits, so it's probably not worth talking to him.  I guess that means I should try and lobby Labour or the Greens, but I don't know how to go about getting their attention on an issue that's not one of current debate.  Any ideas (or any feedback on my solution to the current unjust system) would be appreciated!

Retirement savings vs. feeding the hungry

This week I have been challenged by the story of Huon, a Christian woman living in Cambodia.  In the context of the food crisis in 2009, an Australian woman for whom she was working wrote:

For Huon, the cook for the InnerCHANGE team office, a single woman in her forties, who works seven hours a day five days a week, making twice what a factory worker would make for six full days of work, the inflation means that she is riding her motorbike less, eating less and choosing cheaper food. She is not saving at the moment despite the need for surgery in the near future and the fact that she has no one to take care of her when she is old. She says: 'I know that I should save some money in case things get worse, but then I see my neighbors who are hungry and I have to share, or how could I be a Christian? I just have to trust God for the future.'

source

Martin and I expect to pay off our mortgage in February next year.  After that, it is our intention to redirect that portion of our income to retirement savings.  We intend to save enough money to fully support ourselves in retirement (without a pension from the government) as that seems like the responsible thing for rich people like us to do.

And yet, like Huon, we have neighbours who are hungry (they just don't live next door); and we have plenty to share.  If we hold onto our surplus, can we, in her words, "be Christians"?

If we redirected that mortgage money to giving instead of saving, we could more than triple our monthly giving (not that all, or even most, of our charitable giving goes to feeding the hungry).  Is it right for us, as Christians, to keep all that for ourselves?  After all, we serve the God who "owns the cattle on a thousand hills" - shouldn't we trust Him for our future needs?

As things stand, we wouldn't even have to trust Him that much!  After all, the New Zealand government, unlike the Cambodian government, provides its citizens life-long free medical care and an adequate pension in old age.  We also have Kiwisaver savings that are likely to grow to the equivalent of $350k by the time Martin retires.  The leap we'd be taking is ever so much smaller than that taken by Huon.

So what should we do?  We still have a year to decide, but we're definitely talking and praying about whether to change our plans.

'Ethical' Kiwisaver schemes

See update re. Koinonia at end of post

The Kiwisaver scheme to which Martin currently belongs is being closed down, so we're on the hunt for a replacement.  Ideally we'd like to invest in a scheme that invests in something socially positive, but if we can't have that then at least we want to exclude investments in things that are really harmful.  To see what our options are I've been trawling all the Kiwisaver schemes that pitch themselves as 'ethical'.  I thought I'd share what I'd found here in the hope of saving someone else some work.

All the 'ethical' schemes exclude investments in alcohol, tobacco, gambling and armaments except Craig's Investment Partners' 'Balanced SRI' Fund (which only aims to "have a diversified portfolio of investments that are deemed to be environmentally and socially sustainable") and OneAnswer's 'Sustainable Growth' Fund (which excludes investments in tobacco, gambling and armaments but allows investments in alcohol).  I've listed any other 'ethical' criteria the various schemes employ under their names below, along with what kind of investment they are, what their past returns have been like and what fees they charge.  Note that for 'past returns' I'm listing the returns to end March 2014, after tax (at the maximum rate) and fees.

Fidelity Life's Ethical Kiwi Fund
NB: This fund appears to no longer be accepting new members.

• No additional ethical criteria.
• A medium risk balanced' fund investing 60% in shares and 40% in fixed interest.
• Past returns: 5.8% per annum over the last five years (9.2% over the last three).
• Fees: $3.03 per month plus 1.16% and up to 0.065% per year.

SuperLife's Ethica

• In addition to alcohol, tobacco, gambling and armaments it excludes investments in pornography and fossil fuel extraction.  It also excludes investments where it sees the activity behind the investment having negative social/community outcomes, damaging the environment or violating UN standards on human rights, health and safety or child labour.  Investments in activities that would be illegal in NZ are also excluded.
• A medium-risk 'balanced' fund that's 60% shares and property and 40% cash and bonds.
• Past returns: 6.3% per annum over the last five years (5.0% over the last three).
• Fees: $2.75 per month plus 0.23% and approx 0.50% per year.

Grosvenor's Socially Responsible Investment Balanced Fund

• No additional ethical criteria.
• A medium-risk 'balanced' fund that's 50-70% shares with the balance in fixed interest and cash.
• Past returns: I can't find these - the disclosure statement only lists the 'growth' fund, as does 'Sorted', so I think this may be a new fund.
• Fees: $3 per month plus 1.17% per year.

Craig's Investment Partners' Balanced SRI Fund

• Aims to "have a diversified portfolio of investments that are deemed to be environmentally and socially sustainable".
• A medium-risk 'balanced' fund that's 60% shares and 40% cash and fixed interest.
• Past returns: 5.4% per annum over the last five years (4.7% over the last three).
• Fees: 1.25% entry fee plus up to $30 and 1.25% per year.

Grosvenor's Socially Responsible Investment Growth Fund

• No additional ethical criteria.
• A high-risk 'growth' fund that mostly invests in New Zealand and Australian shares.
• Past returns: 5.2% per annum over the last three years.
• Fees: $3 per month plus 1.17% per year.

OneAnswer's Sustainable Growth Fund

• In addition to tobacco, gambling and armaments it excludes investments in nuclear power, pornography and fur.  It does not exclude investments in alcohol.  It only invests in companies which it sees as being in the top 50% of their class in terms of environmental, social and governance policies and transparency.
• A high-risk 'growth' fund with at least two thirds of the funds invested in shares and/or transferable securities.
• Past returns: 5.8% per annum over the last five years (2.5% over the last three).
• Fees: $2 per month plus 1.62% per year.

Amanah

• In addition to alcohol, tobacco, gambling and armaments it excludes investments in money-lending, pornography and pork.  It also takes into account "environmental, social, and governance considerations" in its investments and is Shari'ah compliant.
• An 'aggressive' fund investing in equities, debt-free real estate and cash.  It will only invest in companies with a low level of debt (no 'high-gearing'.)
• Past returns: the fund has only been in existence since late March 2014.  Between then and end June 2014 it lost 4.9%.
• Fees: $2.70 per month plus 1.78% and 15% on any returns above 8% per year. 

Update from September 2016

I wasn't looking at restricted schemes when I did this post two years ago.  However, since then Koinonia, whilst still restricted, has become much more open: anyone who self-identifies as Christian can join.  Here's what I've found about it.  For consistency, I've given returns to end of March 2014 (the same as for the rest of the post), although that means I can only give three-year returns and not five-year returns as the older data is no longer easily accessible.

Koinonia Income Fund

• In addition to tobacco, gambling and armaments it excludes direct investments in pornography and beer (but not wine or spirits - it's an Anglican fund and these are used by Anglicans in worship).  They also avoid:
• companies whose primary purpose is extraction and production of fossil fuels;
• those with a poor environmental or industrial relations record;
• those where the management "appears excessively concerned with their own remuneration";
• those where "the activities of key individuals raise serious ethical concerns". 
• A low-risk 'defensive' fund that's 100% cash and fixed interest.  35% of funds are invested overseas, where they will not necessarily be invested in accordance with their investment guidelines.  As they say: "Our policy does not preclude investment in certain overseas funds which may not necessarily have the same approach as the Board to ethical investment. For example, tracker funds, alternative strategy funds and certain fixed interest funds.".
• Past returns: 2.1% per annum over the three years ending 31 March 2014 (note that, for the first year of the period, this was actually a different fund that was wound up and replaced).
• Fees: 1.5% (no monthly fee).  Note that this fee doesn't seem to be published anywhere: my number is what's given in a number of recent quarterly reports.

Koinonia Balanced Fund

• In addition to tobacco, gambling and armaments it excludes direct investments in pornography and beer (but not wine or spirits - it's an Anglican fund and these are used by Anglicans in worship).  They also avoid:
• companies whose primary purpose is extraction and production of fossil fuels;
• those with a poor environmental or industrial relations record;
• those where the management "appears excessively concerned with their own remuneration";
• those where "the activities of key individuals raise serious ethical concerns". 
• A medium-risk 'balanced' fund that's 50% cash and fixed interest, 25% international shares, 20% Australasian shares and 5% 'alternative assets' (forestry etc.).  45%-50% of funds are invested overseas, where they will not necessarily be invested in accordance with their investment guidelines.  As they say: "Our policy does not preclude investment in certain overseas funds which may not necessarily have the same approach as the Board to ethical investment. For example, tracker funds, alternative strategy funds and certain fixed interest funds.".
• Past returns: 4.0% per annum over the three years ending 31 March 2014.
• Fees: 1.7% (no monthly fee).  Note that this fee doesn't seem to be published anywhere: my number is what's given in a number of recent quarterly reports.

Koinonia Growth Fund

• In addition to tobacco, gambling and armaments it excludes direct investments in pornography and beer (but not wine or spirits - it's an Anglican fund and these are used by Anglicans in worship).  They also avoid:
• companies whose primary purpose is extraction and production of fossil fuels;
• those with a poor environmental or industrial relations record;
• those where the management "appears excessively concerned with their own remuneration";
• those where "the activities of key individuals raise serious ethical concerns". 
• A high-risk 'growth' fund that's 40% international shares, 25% cash and fixed interest, 25% Australasian shares and 10% 'alternative assets' (forestry etc.).  50-60% of funds are invested overseas, where they will not necessarily be invested in accordance with their investment guidelines.  As they say: "Our policy does not preclude investment in certain overseas funds which may not necessarily have the same approach as the Board to ethical investment. For example, tracker funds, alternative strategy funds and certain fixed interest funds."
• Past returns: 4.3% per annum over the three years ending 31 March 2014.
• Fees: 1.8% (no monthly fee).  Note that this fee doesn't seem to be published anywhere: my number is what's given in a number of recent quarterly reports.

Summary of past returns (after tax and fees) and fees (updated to include Koinonia):

	fund type	return over 5 years	return over three years	fixed fee (annual)	percentage fee
Koinonia Income	defensive	?	2.10%	$0	1.5%
Koinonia Balanced	balanced	?	4.90%	$0	1.7%
Fidelity Life's Ethical Kiwi	balanced	5.80%	9.20%	$36.36	1.22%
SuperLife's Ethica	balanced	6.30%	5.00%	$33	0.73%
Grosvenor's SRI Balanced	balanced	?	?	$36	1.17%
Craig's Investment Partners' Balanced SRI	balanced	5.40%	4.70%	$30	1.25%	+ 1.25% entry fee
Koinonia Growth	growth	?	4.30%	$0	1.8%
Grosvenor's SRI Growth	growth	N/A	5.20%	$36	1.17%
OneAnswer's Sustainable Growth	growth	5.80%	2.50%	$24	1.62%
Amanah	growth	N/A	N/A	$32.40	1.78%	+ 15% on any returns above 8%

We are the 1%

The slogan of Occupy Wall St. was "we are the 99%" - the ordinary people, not the super-rich.

A few weeks back, Martin and I got an unexpected insight into the lives of those super-rich 1%'ers.  They're us!  According to GlobalRichList.com, Martin's income is in the top 0.42% globally.  He's the 25 millionth richest person in the world!

The numbers are calculated on a 'purchasing power parity' basis - i.e. they try to account for what you can buy with that income based on what prices are where you live.  If we lived in Thailand, but Martin received the same income as he gets here, he'd be in the top 0.08% of income earners globally as the cost of living in Thailand is a lot lower than in New Zealand.

So, what's it like to be so rich?  To be honest, it feels quite modest to me.  Roughly a third of our income goes to taxes and donations, a third essentially to savings (that's 'Mortgage + Kiwisaver' on the graph) and we live on the remaining third.

Our savings are targeted at being able to support ourselves in retirement at about the level of National Super and to own a 2-3 bedroom unit outright.  We're assuming that the government won't be giving us a pension as we don't think that rich people like ourselves should be relying on government support.

The amount that we live on (excluding our mortgage payments, Kiwisaver contributions and donations) is significantly less than the amount the government pays to retired couples who own their own home - although it is much more than we would get if Martin was unemployed and I was back on the sickness benefit.

benefits for a couple who won their own home, one eligible for a disability allowance, as of Sep 2011	weekly	annual
M on unemployment, H on sickness benefit	$395	$20,623
our current expenditure	$472	$24,661
National Super	$582	$30,380

I've come away from this exercise feeling subdued.  I've always known we were wealthy - after all, how many couples can live on only one income? - but I hadn't realised quite how far up the tree we are.  I'm stunned by how poor that means everyone else must be.

A little thing from the latest Grapevine magazine confirmed that impression:

If you've got food in your fridge, clothes on your back, a roof over your head and a place to sleep

... you are richer than 75% of the world.

If you have money in the bank, cash in your wallet, and spare change in a pocket somewhere

... you're among the top 8% of the world's wealthiest.

and

If you're reading this
... you're more fortunate than 3 billion people in the world who cannot read at all.

Give a man a fish...

I was intrigued and excited by the story in 'Act one' of this recent This American Life episode.  In it, Planet Money reporters looked into the work of GiveDirectly: a charity that, rather than giving poor people cows or seeds or other goods or training, simply gives them money.

The reporters went to a village in Kenya where the poorest residents had each received the equivalent of US$1000.  From what I could gather, they were people living in a cash economy and this money was roughly what they would normally earn in a year.  The reporters were keen to find out what that money had been spent on.

The villagers lived in thatch-roofed huts and the majority of them had used part of their money to replace the thatch with corrugated iron.  Iron is not only more water-tight and much less hassle to maintain than thatch, over its 10 year life-span it also works out considerably cheaper (you have to buy special grass for thatch).  With the remainder they did all kinds of things: mostly buying income-generating assets such as a cow or a motorbike, but not always.

The story that moved me the most was that of one man who spent the remaining money on a mattress.  Previously he'd been sleeping on the dirt floor (maybe on some kind of a mat - I can't remember for sure), now he sleeps on an actual mattress.  When he was asked why this was important to him, he said something like: "Before, I was just the image of a human, but now I am a human.".  I was stunned.

It got me thinking, too.  I've never heard of a charity that gives away mattresses.  Cows or grain mills, yes: but not mattresses.  Yet it was a mattress that this man wanted, and he wanted it because it gave him dignity.  And surely that's really important?

It also made me realise my own racism.  It keeps on popping up within me: racism.

When I heard about GiveDirectly, I was uncomfortable.  It didn't seem right to just give these people money.  I wasn't confident that they'd spend it well, whereas I was confident that a trustworthy aid agency would give them the right goods and training to really improve their lives.  "Give a man a fish, feed him for a day" and all that.

However, a while ago when I heard that the New Zealand government was proposing to limit what certain beneficiaries could spend their money on, I wasn't very happy about it.  Partly I was concerned on a practical level - how could WINZ know what was best for everyone in all their different circumstances? - and partly I was concerned that it would take dignity away from already vulnerable people.

Why had I thought it would be any different in Kenya?

In the This American Life story they also talked about how all the people in a nearby village had recived cattle from another charity.  In the GiveDirect village, some people had chosen to buy cattle, but others had bought all kinds of other things instead - including the man who had more-or-less bought himself dignity.  It seems that my concerns about the New Zealand welfare proposal may well have been valid, but I'm ashamed that I didn't apply the same respectful thinking to vulnerable people far off as I did to those in my own country...


NB If you don't want to listen to the whole This American Life story (it's 28 minutes long), you could listen to a 6 minute version on the Planet Money website or read an article about the investigation on the New York Times website.

Educating donors

I thought I'd share my response to this post by Vinoth Ramachandra in Sri Lanka.

Hi Vinoth,

You raise good points but, like Carol, I've been wondering what I - a rich westerner - can do with them.  Here are two thoughts:

1. Handled appropriately, child sponsorship itself can be an excellent way to educate donors.  I'm currently reading a Psychology for a Better World by Niki Hare (available as a free download from the author's page here).  The book looks at what psychological research can tell us about how to go about effecting social change.  One point she makes is that people are more likely to respond generously to the plight of one person in need than to the plight of many people in need. Child sponsorship makes use of that psychological trait by giving a potential donor a single person to respond to.

Once the potential donor has responded in that way, the agency providing sponsored children is in a position to further educate them about development needs and where they can help.  However, without the 'hook' of sponsorship, the agency would have been unlikely to be able to provide such education: child sponsorship gives them the entree into the life of the donor and can provide an educational opportunity.

I don't know about other Western countries, but the two main Christian agencies in New Zealand that provide child sponsorship (TEAR Fund and World Vision) both give donors the opportunity to support many other development and emergency relief projects and actively educate donors about them.  For myself, as a young adult at a music festival I was moved to sponsor a child through one of these agencies.  Over time, I came to understand more about development and have supported a variety of other projects instead.

2. The advantages of directly supporting indigenous development initiatives are obvious but, in practise, it's very difficult to do.  I agree with Carol that it's difficult to find such initiatives - I suspect that the majority would, indeed, be impossible to find as it's not trivial for people with little access to resources to have a web presence.

However, in two cases I have come across indigenous initiatives that I have been keen to support.  In the case of one (BEN Namibia - which provides bicycle ambulances etc. in Namibia) this wasn't too difficult: through their website I was able to make a credit card donation and could have set up monthly donations etc. just as I could for a New Zealand charity.  In the other case (Al Nayzak - an organisation which provides extension education to gifted kids in Palestine) I needed to make an international bank transfer directly to their account.  I was unable to do this at first as my NZ bank appeared to have no links to their Palestinian bank and, in the end, I had to transfer money into their Israeli account from which I gathered they would - with difficulty - be able to transfer the money to Palestine.

My ability to support both of these indigenous charities depended on them:
- having a web presence
- being able to communicate with me in English
- having access to the international banking system

This doesn't seem ideal!

I suspect that a better way for people such as myself to support indigenous initiatives is for NGOs in our own countries to take up a brokerage role.  They can identify reputable charities overseas, bring them to our attention and then handle for us the communication and money transfer aspects.  In New Zealand, TEAR Fund has taken on this role, and it sounds from Carol like TEAR Australia and Christian Aid do something similar.

Thanks again for your thought-provoking post.

--Heather :-)

Render unto Caesar

A few weeks ago Martin and I read a well-known story from the book of Luke in the Bible.  To set the scene, it occurred in the week before Jesus was executed, when Jews from all over Israel had gathered in Jerusalem for a religious festival.  Tensions were running high around Jesus - this new religious teacher loved by the crowds but who the religious establisment saw as heretical and deeply dangerous.

This is our story:

The religious leaders sent spies to keep a close watch on Jesus. The spies pretended to be honest. They hoped they could trap Jesus with something he would say. Then they could hand him over to the power and authority of the governor.

So the spies questioned Jesus. "Teacher," they said, "we know that you speak and teach what is right. We know you don't favor one person over another. You teach the way of God truthfully.  Is it right for us to pay taxes to Caesar or not?"

Jesus saw they were trying to trick him. So he said to them, "Show me a silver coin. Whose picture and words are on it?"

"Caesar's," they replied

 He said to them, "Then give to Caesar what belongs to Caesar. And give to God what belongs to God.

 They were not able to trap him with what he had said there in front of all the people. Amazed by his answer, they became silent.

Luke 20:20-26 NRIV

I know this story well and I've puzzled over it for years.  I've read it carefully in context, trying to understand what Jesus was trying to say.  I've even read articles about it, hoping that someone else's reflections would shed light on it.  This time, however, the meaning seemed so obvious that I'm struggling to remember what my problem was with it!

Martin and I are working our way through the book of Luke at the moment.  In recent weeks we've already puzzled our way through two earlier stories about money: the story of the shrewd manager (Luke 16:1-14) and the story of three servants who were each entrusted with money while their master was away (Luke 19:11-26).  In the first of these stories, money was referred to as 'dishonest gains' ('wordly wealth' in the translation the links will take you to) and a thing of very little importance.  The point of that story was, if you could be faithful in using such an insignificant thing as money to achieve ends that really mattered, one day you would be given 'true' wealth that would really belong to you and would really last.  In the second story, servants who were able to significantly grow the vast sums of wealth their master had entrusted to them were described, again, as having been faithful in "a very small matter".

So it seems that, in the book of Luke, Jesus is presented as seeing money as a thing of very little importance.  It pales into insignificance beside the 'true wealth' which you get from God.

With that understanding already with us, the meaning of this latest episode seemed clear.  Caesar has put his image on these coins and he's instituted a taxation system: he clearly thinks money matters.  However, we know better: it's a thing of very little importance, and is definitely not to be confused with real wealth.  I think that Jesus is saying: if Caesar wants this silly money stuff, then give it to him - but give what really matters to God.

I find that challenging - not least because I don't see money as being of little importance at all.  Instead, I manage my money very carefully, very much acting like it matters a lot.  In addition, I live in a society where we struggle to value anything that doesn't have a dollar value.  But here is Jesus saying that money is a profoundly unimportant thing.

I guess that also sheds light on what he says in the famous 'sermon on the plain', also in the book of Luke.  Jesus says there that if someone steals from you, you musn't demand your property back - you shouldn't even stop them from taking more of it!  That makes more sense when you understand that, contrary to what you might think, the things that they can take this way don't really matter all that much and aren't really worth fighting for.

Something I find really exciting about this insight is that way that it has been built up as we've made our way through the book of Luke.  I'm so appreciating working my way through the Bible in whole books, rather than in scattered passages or verses taken from many different places.  These books are, after all, books.  The stories within them are episodes in a bigger story, not just entities in their own right, and Martin and I have been finding it immensely rewarding to read them as such :-)

How 'real' are real (vs nominal) prices/wages?

Whichever economist decided to call inflation-adjusted price and wage figures 'real' values had a real bad idea. It's a bit like calling an era 'modern' - what do you call your next degree of refinement?

I recently listened to a debate on the American economy where much was made of whether the average 'real' wage had increased since the seventies, and also watched a video by one of the participants (Horwitz) where he discusses cost of living; allowing for inflation (or change in average industrial wage); and the difficulty that the underlying products being priced change radically over time. Horwitz focuses on how the car you buy today is wildly different than a car from 80 years ago, so for only a few more hours of labour you can buy a much more useful car.

The next day I read this book review which quotes Christopher B. Leinberger's calculation that the need to buy a car adds about $135,000 to the effective cost of the average suburban house (in 2005 America). How do you factor that into your inflation calculation? You get more benefit, but you are also more dependent. I believe this is meant to be accounted for by the scope of the basket of goods used to calculate inflation, but the number of estimates and approximations starts to make the mind reel.

------

ps. If you're wondering what the 'nominal' prices/wages mentioned in my title are, they are just the actual dollar values spent/earned at the time of spending/earning; the original numbers before any adjustment.

Also, hat tip to Chris Blattman for putting me onto the blog where I found Horwitz, which I hope will give me some 'Austrian' economist perspectives that I have lacked exposure to thus far.