In our previous blog, we talked about the importance of taking a deeper look into ethical investing options and what your KiwiSaver fund is investing in. At National Capital, we don't just look at ethical investing as a checkbox exercise but engage with various KiwiSaver providers, to really understand what their ethical investing stance is and how it translates into their investments. As an example, we did further research into CareSaver to see if they truly walked the talk about being an ethical KiwiSaver provider.
CareSaver was launched in mid-2019 and is an actively managed KiwiSaver provider by Pathfinder Asset Management. The fund’s intention is to invest in companies that are undervalued, have growth potential and do not harm society. CareSaver currently offers three types of funds; conservative, balanced, and growth. As of 31st July 2020, these funds have annual returns of 4.70%, 5.35%, and 11.34% respectively (Source: CareSaver).
CareSaver’s Investment Philosophy
An ethical investment for you might mean something very different to someone else. Where do you draw the line? To get a better understanding of where CareSaver stands, here are some things that CareSaver considers in their investment practices:
a. United Nations sustainable development goals
CareSaver aligns its investment decisions with the sustainability objectives set out by the UN.
b. Investing ethically
The fund also actively seeks out companies with high Environmental, Social, and Corporate Governance (ESG) ratings to invest in and excludes companies engaged with industries or activities believed to be harmful.
c. Climate change awareness
Due to factors such as changes in consumer preferences, company behaviour, and the economy’s transition to a low carbon economy, CareSaver believes that companies with lower carbon intensity will make better long term investments.
d. Human rights
CareSaver also avoids investments in companies whose business practices are controversial or do not respect human rights and the welfare of animals.
Based on the fund’s ethical investment policy, here are some specific industries and activities in CareSaver’s exclusions policy.
- Adult Entertainment
- Animal Testing
- Controversial weapons
- Factory farming
- Fossil Fuels
- Human Rights & Environmental Violations
- Palm Oil
In addition to these industries, CareSaver also excludes organisations that have a lack of board diversity. For example, CareSaver only invests in NZX companies who have at least one female director on the board.
What is the process CareSaver uses when selecting which companies are included in their KiwiSaver funds?
CareSaver is the first NZ client of Sustainalytics, an external provider that breaks down each of the ESG factors to rank how ethical an investment is. Using the information on these 30-60 page reports, CareSaver is able to evaluate an organisation’s ESG practices and how it makes its money to see whether these align with CareSaver’s investment philosophy.
Aside from looking at the ESG metrics, Sustainalytics also ranks companies based on a controversy rating. This allows CareSaver to identify companies whose actions have been causing controversy or a pattern of negative headlines in the media. The controversy rating reviews matters such as current news flows, lawsuits, safety issues with consumers, and aggressive tax planning. These issues can help pick up any risks that may affect the long-term performance of an organisation, which in turn can impact your KiwiSaver outcomes.
Finally, CareSaver also conducts some of its own internal reviews. Pathfinder has an environmental scientist on the team and the head of investment is both a financial professional with a science background.
Besides its strict investment selection for ethical companies and industries, CareSaver also pledges to donate 20% of its management fees to New Zealand charities such as Forest & Bird and the Mental Health Foundation.
How do you ensure that you continue to remain ethically invested?
National Capital doesn’t simply rely on KiwiSaver providers' claim to be ethically investing. We engage with various providers and investment managers to understand their ethical investing policies and how they are considered when selecting investments. This is not a one time process, we regularly conduct research to ensure that the funds our clients are invested in actually stand by the claims that they make.
In addition to ethical considerations, we ensure that the funds we recommend you are suitable for you based on your goals and volatility capacity. This allows us to help our clients get better retirement outcomes and a potentially larger KiwiSaver balance.
Are you in the right KiwiSaver fund? Take National Capital’s HealthCheck to find out.