Investing for sustainability

30 September 2019

By Barry Coates, Founder and CEO of Mindful Money

Progress on sustainability is starting to ramp up. The Zero Carbon Act is wending its way through Parliament, regulation on waste has been strengthened, and more funding has been allocated to public transport. It’s all too slow to meet the fierce urgency of climate change, but change is happening. The next stage needs to tackle some of the most intractable barriers, notably our deeply unsustainable finance system.

For too long the financial system has operated as if it was divorced from the real economy. The decision-making metrics have been all about financial returns and risks, not about the impacts on people, our natural world or the climate. As a result, money has flowed into tax havens, weapons, pollution and exploitation. By contrast, investing in sustainability has been seen to be too risky, too long term and unproven.

At an individual level, most of us have put our hard-earned savings into KiwiSaver accounts without knowing how our money was used. Despite assurances of investing responsibly, only 1% of KiwiSaver funds have policies to avoid sectors like gambling, pornography and alcohol. And only 2% avoid investing in exploration and production of fossil fuels.

I have established a new charity, Mindful Money to show New Zealanders where their KiwiSaver funds are invested - in fossil fuels, weapons or in companies that violate human rights or test cosmetics on animals. Over $4 billion of KiwiSaver funds are invested in issues that surveys say people want to avoid. For example, KiwiSaver funds invest almost $1.2 billion in fossil fuels. It is a sad irony that many of those marching for climate action are invested in companies like Exxon Mobil through their KiwiSaver fund.

There are now better alternatives and new funds coming onto the market. Mindful Money’s website helps you find the fund that fits your values. It’s free, quick and easy to shift your funds to a more ethical alternative. And being ethical doesn’t mean lower returns. In fact, the weight of research says that, on average, ethical funds provide financial returns that as high or higher than conventional investment. It makes sense – companies that are more sustainable have loyal customers, motivated employees and no environmental liabilities.

Our aim is to build public demand for ethical investing alongside the growth of institutional funding for sustainable investment. In New Zealand, there are new initiatives from iwi, new impact funds, green bond issues and the government’s Green Investment Finance to catalyse investments in reducing greenhouse gas emissions. Finance for green infrastructure and buildings is starting to flow, such as through the first green bond issue for commercial buildings to Argosy Property.

Systemic change is also needed. The challenge is to “finance green and green finance” as the UK’s Green Finance Strategy puts it. Other such initiatives include the EU Sustainable Finance Action Plan and China’s Guidance on a Green Finance System. Now New Zealand has its own Sustainable Finance roadmap being developed under the auspices of the Aotearoa Circle, with a consultation paper to be launched at the end of October.

Change is underway. Now is the time to scale up action at the individual, institutional and policy levels.

To check your KiwiSaver and find a fund that fits, visit www.mindfulmoney.nz

Banner photo by Master Wen on Unsplash