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Boom: 88 KiwiSaver funds invested in nukes

New research says 88 KiwiSaver funds have investments in nuclear weapons.

Thursday, March 18th 2021, 1:45AM 6 Comments

by Daniel Smith

Barry Coates

Analysis of KiwiSaver portfolio data at September 30, 2020 shows that $210 million of KiwiSaver funds are invested in companies that produce weapons.

Of that total, $52 million is invested in 17 nuclear weapons producers.

The revelation came as a surprise to Mindful Money founder Barry Coates, who told Good Returns that “most funds in New Zealand make the claim that they are not invested in nuclear weapons.”

“We did analysis a year and a half ago and found that there were investments in nuclear weapons and we thought that there was a process of funds getting out of them.

“It came as a big surprise that so many funds are invested in nuclear weapons when it is so clear that many members of the public don’t want that to happen.”

Mindful Money’s analysis shows the value of the 88 KiwiSaver funds invested in nuclear weapons was $52 million at the end of September 2020.

Most at risk of having nuclear weapons systems in their fund are those passive portfolios that have little exclusions on weapons systems as a part of their index funds.

Along with 41 other KiwiSaver funds, the NZ Super Fund has investments in BAE Systems, one of the largest defence companies in the world. They produce nuclear weapons systems and have sold arms to the Saudi military since Saudi Arabia became involved in the Yemen war.

A spokesperson from NZ Super told Good Returns that while the “NZ Super Fund excludes companies involved in the manufacture of nuclear explosive devices, we do not exclude companies involved in the manufacture of delivery and control systems for nuclear weapons.”

Meaning that NZ Super screens companies that make nuclear explosive devices, but not the companies that make the rocket propulsion that bring these bombs to their targets.

Other passive funds have also been caught out.

The NZX-run SuperLife Age Steps – Age 30 is invested in a range of weapons manufacturers. Along with 56 other KiwiSaver funds they invest in Safran S.A., a French company producing key components for a new generation of nuclear missiles. And alongside 23 other KiwiSaver funds they invest in Lockheed Martin, a top producer of military equipment, whose weapons have allegedly been sold to a number of governments who have been implicated in human rights violations.

Hugh Stevens, Smartshares CEO told Good Returns that “Smartshares’ range of investment choices is designed to allow investors to make informed decisions that suit their own unique need and preferences. To achieve this, we offer a range of funds, from fully integrated responsible investment options to full market index tracking options.”

Many of the 88 KiwiSaver funds that had investments in nukes were index funds.

Coates says that many managers of New Zealand index funds may say, “‘Because it is in a passive portfolio we have no control over the mandate.’ But if that is the case then why don’t you get a passive portfolio that does have those exclusions.”

John Berry, CEO and founder of Pathfinder, believes that Mindful Money is an invaluable resource, but that the onus should not be on consumers to do the digging themselves.

“Providers should actually be making it really clear what they do and don’t invest in.

“One thing I often see is that managers have a long list of exclusions, and it is almost like it is reactionary and they add to the list every time there is another exclusion. But I think there should be a framework behind these exclusions so that consumers can understand what funds thinking is.”

Whether in active or passive funds Berry says that manager’s “should know what is in the underlying portfolio. But we should remember that if a company is legal you can invest in it.

“What we need is for providers to be really clear with what they are invested in so consumers can make a choice that aligns with their values.”

The 2020 annual survey of the New Zealand public by Mindful Money and the Responsible Investment Association of Australasia showed that 81% of Kiwis want to avoid weapons in their investments.

Tags: KiwiSaver Mindful Money responsible investing RIAA Weapons investment

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Comments from our readers

On 18 March 2021 at 9:45 am Conor said:
My name is Conor Roberts and I work in NZ Super Fund's communications team.

It is important to note the distinction that governs our exclusion policy between companies involved in the production of nuclear explosive devices and distinct delivery systems comes from the New Zealand Nuclear Free Zone, Disarmament, and Arms Control Act 1987 (Nuclear Free Act).

It bans "any nuclear weapon or other explosive device capable of releasing nuclear energy", but excludes "the means of transport or delivery of such a weapon or device if separable from and not an indivisible part of it.”
On 18 March 2021 at 2:39 pm Murray Weatherston said:
I strongly suspect this story is fuelled by competitor Kiwisaver managers virtue signalling.
On 18 March 2021 at 3:54 pm Barry Coates said:
Thanks for your comment Murray. That is not the motivation for the analysis. The motivation is that investors in KiwiSaver funds are interested in which companies they invest in through their KiwiSaver fund, confirmed in the findings of annual surveys, but they are not informed. Mindful Money has been established to provide that transparency. It is not virtue signalling. People care. Financial advisers and fund managers would be well advised to listen to the views of their clients and provide transparency. Asking about client's values and understanding their investment preferences (avoidance as well as inclusion) is part of knowing your client. I'd be happy it to discuss it further at any stage.
On 19 March 2021 at 11:14 am Mr Mojo said:
It is a falsehood to suggest that most KiwiSavers care about anything enough to move from one provider to another. Research has shown that despite what KiwiSavers say on subjects such as fees, investment performance, service & responsible investing policies, that level of 'care' doesn't translate into action. That may be an unpalatable truth for some but it's the truth nevertheless.
On 19 March 2021 at 4:26 pm Barry Coates said:
Thanks Mr Mojo, I agree that customers have been loyal in the past. However, we are seeing that changing rapidly for 'ethical' issues as the public awareness of climate change, sustainability and social issues grows. This is happening across society, in NZ and internationally, and the finance sector is not immune. Mindful Money is a new initiative, but even after 18 months, it has been striking to see the upswing in people shifting for ethical reasons.
On 24 March 2021 at 11:05 am Mr Mojo said:
Ok I stand corrected. The truth is really, really unpalatable for some.

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