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Speaker 1: The world seems more politically polarized than ever. Ethical funds

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Speaker 1: in major markets recorded record outflows earlier this year. Amid

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Speaker 1: rhetoric about woke capitalism, rapidly rising defense spending has some

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Speaker 1: reconsidering companies that were once too hot to touch. At

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Speaker 1: the same time, some are taking an even longer view

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Speaker 1: and doubling down on sustainability, calling out asset managers that

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Speaker 1: don't vote with environmental concerns in mind. So, if funds

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Speaker 1: are being forced to choose, how might your money be

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Speaker 1: taking sides too? This week, we're talking with a fund

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Speaker 1: manager taking the high road with key We say the

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Speaker 1: contributions and managed assets before we hear more of that.

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Speaker 1: Some important information you should always consider when investing.

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Speaker 2: Investing involves the risk you might lose the money you

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Speaker 2: start with. We recommend talking to a licensed financial advisor.

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Speaker 2: We also recommend reading product disclosure documents before deciding to invest.

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Speaker 2: Everything you're about to see and here is current at the.

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Speaker 3: Time of recording.

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Speaker 4: Welcome John Berry.

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Speaker 3: Thank you, great to be here.

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Speaker 4: Yeah, great to have you here.

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Speaker 1: Look, the world seems very divided right now. Is money

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Speaker 1: taking sides as well?

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Speaker 3: Yeah? Look, you're right, we're in a really complex polarized

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Speaker 3: world at the moment. And I think historically people saw

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Speaker 3: money just as an investing is just money is a

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Speaker 3: store of value, money is a medium of exchange. But

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Speaker 3: now people are coming to realize, actually, how you invest

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Speaker 3: your money as well will real world impacts and it

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Speaker 3: really matters for the choices you make and where you

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Speaker 3: invest or where you don't invest.

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Speaker 1: Right, quick reminder, what is EESG ESG?

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Speaker 3: ESG is an acronym that stands for environmental, social and governance,

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Speaker 3: and so we can take these factors into account with

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Speaker 3: how we invest. Historically, it's sort of conventional thinking around

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Speaker 3: ESG is, how is it going to impact the future

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Speaker 3: cash flows of a company company has governed well or

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Speaker 3: governed poorly? What does that mean for the future value

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Speaker 3: of the company. What does it mean for future cash flow?

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Speaker 3: Am I going to make more money out of the company?

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Speaker 3: Am I going to manage risk by taking ESG into account?

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Speaker 3: And that's kind of different to ethical investing. Ethel Investing says, yes,

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Speaker 3: that's true, you've got to take this into account to

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Speaker 3: manage risk and make more money. But ethical investing is

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Speaker 3: also let's put a values overlay on it, and what

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Speaker 3: are values we want to take into account with investing

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Speaker 3: around environmental issues or social issues, regardless of the cash

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Speaker 3: flow impact on a company.

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Speaker 1: Right, So, when mornings Star reported last year that there

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Speaker 1: was a net drop in ESG funds, that there have

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Speaker 1: been a client and just the number of funds operating

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Speaker 1: out there from I think six hundred and forty six

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Speaker 1: to five hundred and eighty seven. Does that suggest that

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Speaker 1: there's some natural attrition going on, that these funds are

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Speaker 1: just simply expiring or changing their shape or whatever, or

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Speaker 1: that there's been some kind of political climate change around

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Speaker 1: how appealing they are.

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Speaker 3: Yeah, I think there's a few things going on there.

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Speaker 3: One is around labeling, particularly in Europe, where some managers

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Speaker 3: may have been using the sustainable label and perhaps when

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Speaker 3: so sustainable so they were under the rules in the

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Speaker 3: EU have relabeled them. So a lot of the disappeared

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Speaker 3: because of the labeling issue. In part, Yes, there are

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Speaker 3: very complex geopolitical factors at play in and that is

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Speaker 3: influencing investment thinking. But the key thing I think is

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Speaker 3: which also comes out of morning Star data, is New

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Speaker 3: Zealand is unique in that every quarter for the last

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Speaker 3: three years we've had positive inflows and sustainable funds. That's

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Speaker 3: quite unique in the world. Even Europe is happening. It

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Speaker 3: ab outflows one quarter, but there is. You know, this

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Speaker 3: is more than a fad, It is actually a real thing.

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Speaker 3: This moved towards sustainable investing or ethical investing.

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Speaker 4: Are we late to the party? Are we mad?

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Speaker 1: Are we just doing it in our own ways? What's

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Speaker 1: the explanation for that?

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Speaker 3: I think it's in my mind it's because New Zealanders

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Speaker 3: are really starting to understand and here deeply about environmental

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Speaker 3: and social issues. So when you look at what New

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Speaker 3: Zealanders want or don't want in their investing, the research

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Speaker 3: done by Mindful Money says that more than eighty percent

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Speaker 3: of Newsealanders don't want environmental degradation, don't want human rights abuses, weapons,

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Speaker 3: or factory farming, for example, a whole collection of issues.

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Speaker 3: More than eighty percent of New Zealanders don't want them,

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Speaker 3: and they're investing. And that number has been very high

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Speaker 3: for for the last few years. So I think New Zealanders.

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Speaker 3: New Zealanders care quite deeply about how the money is invested.

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Speaker 1: If we took a bit about Pathfinder, and for those

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Speaker 1: that haven't heard of it, don't know it, what exactly

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Speaker 1: are you and how do you stand out from the

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Speaker 1: rest of the crowd.

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Speaker 3: So, Pathfinder, we're a fund manager, we have a key saver,

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Speaker 3: we have managed funds, and our mission as a business

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Speaker 3: is to generate individual wealth and collective well being by

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Speaker 3: investing ethically. So we believe in this idea of ruality.

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Speaker 3: This is not philanthropy, ethical investing. We had to make

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Speaker 3: money for our investors. We believe you can do it

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Speaker 3: in a way that not only avoids harm but also

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Speaker 3: as positive benefits of the world. And I suppose that's

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Speaker 3: probably you know, we've been doing this for over a decade,

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Speaker 3: and that probably is what differentiates us from other managers,

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Speaker 3: is that deep belief in purpose and trying to bring

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Speaker 3: that investment process into life.

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Speaker 1: If you look at your phone, a TV screen, anything

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Speaker 1: like that, at the moment, the pictures we're seeing are

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Speaker 1: pretty horrific. We're seeing what feels like nightly reports on

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Speaker 1: conflicts from two extremely volatile regions in the world, and

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Speaker 1: the feeling that goodness, it's all just getting.

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Speaker 4: Worse and worse.

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Speaker 1: How on earth does a fund manager like yourselves a

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Speaker 1: pathwind to try and navigate that?

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Speaker 3: Yeah, look, You're right, it is tough, and for many

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Speaker 3: people there's a sensitive spare and a loss of hope

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Speaker 3: and seeing the conflict is very personal seeing it. And

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Speaker 3: for us we don't focus on a particular conflict and

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Speaker 3: the to sides of the conflict and the politics of

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Speaker 3: the conflict. We just focus on the use of weapons,

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Speaker 3: and we want to avoid weapons. And you mentioned Gaza

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Speaker 3: and Ukraine. You know, there's also Democratic Republic of Congo,

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Speaker 3: there's Saddan, there's Momar. Weapons are being used all around

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Speaker 3: the globe and tragically, it's not a new thing. If

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Speaker 3: we look at the last thousand years of human history,

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Speaker 3: there haven't been very long periods of peace in the

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Speaker 3: world in this conflict. At the moment, the challenge is

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Speaker 3: technology is getting cheaper and more novel and its use

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Speaker 3: as a weapon. It's more accessible, and so as a

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Speaker 3: fund manager, we need to think deeply about avoiding weapons

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Speaker 3: and not being part of the economy of war.

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Speaker 1: But it's getting harder to do that surely. And at

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Speaker 1: the same time some are saying, well, you need to

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Speaker 1: balance this argument, you know, obviously between responsible portfolios and

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Speaker 1: delivering strong returns, but also the importance of defense and

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Speaker 1: the challenge is posed by the ways that you defend yourself.

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Speaker 3: Yeah, yeah, so the challenges you don't get to choose

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Speaker 3: of the weapons used for defense, and for that reason,

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Speaker 3: we'd rather not invest in weapons companies that make weapons

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Speaker 3: if they can be used for offense or defense. And

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Speaker 3: what I'd say around the returns is, yes, weapons companies

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Speaker 3: have had strong returns in the last twelve months. Weapons

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Speaker 3: companies in the S and P five hundred, they are

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Speaker 3: part of the industrial sector. They make up two percent

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Speaker 3: of the market, so it's a roundly small part of

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Speaker 3: the market, and an investor is happy having weapons probably

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Speaker 3: also has fossil fuels in their portfolio. Fossil fuels are

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Speaker 3: almost three percent of the S and B five hundred.

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Speaker 3: Fossil fuels have done terribly in the last twelve months.

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Speaker 3: So yes, weapons have done well in the last twelve months.

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Speaker 3: You've probably also got fossil fuels in the portfolio that haven't.

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Speaker 3: They do kind of balance each other out. But you know,

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Speaker 3: for us, we can't mitigate the fact when we don't

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Speaker 3: have weapons companies, we've missed out on that return from

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Speaker 3: the weapons companies. But that is our choice as an

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Speaker 3: ethical investor, is not to have thosempanies in there.

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Speaker 1: How then do you price or look at a company

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Speaker 1: that's got mixed imperatives, A company like Boeing, for example,

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Speaker 1: that has an entire defense component to its earnings and

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Speaker 1: yet also handles a lot of civilian aviation, provides humanitarian support.

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Speaker 1: I suppose if you look at the kind of the

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Speaker 1: uses that some of the technologies put to, I mean,

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Speaker 1: there'll be lots of other examples that you could probably

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Speaker 1: potentially open a rocket lab or you know, even companies

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Speaker 1: like Ventia or Downers that are supplying they're contracting to

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Speaker 1: defense services to provide you know, base support, but at

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Speaker 1: the same time they're also possibly taking care of your.

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Speaker 4: Local public park. Where do you try to do you

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Speaker 4: try and draw the line there?

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Speaker 3: It's complex and so on the controversial weapons side, land mines,

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Speaker 3: cluster munitions, zero tolerance, one of the best that all

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Speaker 3: conventional military weapons. The challenge there is you're not just

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Speaker 3: talking about a Lockheed Martin that designs and as symbols ware.

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Speaker 3: You're actually talking about hundreds of not thousands, of companies

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Speaker 3: and behind them that provide individual components that go into

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Speaker 3: the weapon. It's what we say, is any company that

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Speaker 3: generates more than five percent of revenue from selling into

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Speaker 3: weapon systems, we won't invest in. So that if they're

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Speaker 3: part of the componentry of building a weapon. Then on

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Speaker 3: top of that, you've got companies that provide services to

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Speaker 3: military as well. So we found we were invested in

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Speaker 3: a company that trained pilots not only for civilian purposes,

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Speaker 3: but train military pilots, not a weapon, but they're getting

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Speaker 3: revenue from military. We wouldn't invest in a military plane.

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Speaker 3: Why would we invest in the company that trains build

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Speaker 3: a flight. So we set a limit of fifty percent there,

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Speaker 3: and we said, okay, if they're providing services to military,

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Speaker 3: if the core business is built around that, so more

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Speaker 3: than fifty percent revenue, we won't invest. So it's sort

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Speaker 3: of a scale of what the company is doing and

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Speaker 3: how much revenue they're running from that activity.

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Speaker 1: Is a lot of that freely available for the information

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Speaker 1: to make those decisions.

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Speaker 3: Obviously enormous amounts of data. So we actually subscribe to

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Speaker 3: data from a couple of offshore providers that will draw

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Speaker 3: down into listed companies and where does the revenue come from?

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Speaker 3: And so yes, I mean you can find articles on

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Speaker 3: companies all over the place. But you know, you can't

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Speaker 3: individually search each company. You need aggregated data, and.

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Speaker 1: I guess sort of really drilling, and particularly I suppose

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Speaker 1: I'm just thinking, because we're still talking about the defense sector,

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Speaker 1: a lot of that is inherently protected. It's kept confidential

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Speaker 1: for various reasons. It's quite opaque to try and get

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Speaker 1: your head around. So I imagine that that's another potential

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Speaker 1: has it if you're considering investing in it, even if

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Speaker 1: you think it's worthwhile, right that it's very difficult to

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Speaker 1: get a clear picture sometimes of what that company is doing,

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Speaker 1: who its customers are, what its prospects are.

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Speaker 3: Yeah, that's true of a lot of companies that are

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Speaker 3: if you think of global corporates, they've got operations all

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Speaker 3: over the place, they have different business divisions, you know,

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Speaker 3: things like weapons or animal testing. They're often not really

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Speaker 3: forthcoming on explaining it and making and making it the

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Speaker 3: information really really available. So we're relying on specialist data

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Speaker 3: sources to help us with that.

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Speaker 1: Okay, it sounds like quite a journey that you have

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Speaker 1: to go on to really get it right and make

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Speaker 1: sure that whatever is in your portfolio meets those meets

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Speaker 1: that labeling you.

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Speaker 3: Yeah, and we're not saying we're perfect all the time

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Speaker 3: and the other challenges. The world is changing at a

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Speaker 3: really fast paced and the question of what is a

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Speaker 3: weapon is actually quite a hard one to answer because

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Speaker 3: traditionally you just think of a weapon as a tank

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Speaker 3: and or a jet fighter or a gun, but now

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Speaker 3: it's also AI and data centers and data processing are

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Speaker 3: being weaponized. You know, is that a weapon? And you know,

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Speaker 3: so the boundaries are getting much more complicated.

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Speaker 1: I guess if you're looking at some of the more

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Speaker 1: kind of hope graphic companies like Palenteer, I don't know

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Speaker 1: if I'm going to get in a lot of grief

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Speaker 1: here with the people naming names, but there are companies

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Speaker 1: that obviously have defense applications that are in the intellect

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Speaker 1: in the IT space, you know, but also have tremendous

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Speaker 1: cybersecurity applications that're they're there to protect people in lots

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Speaker 1: of different ways. How do you make a decision about

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Speaker 1: that kind of thing, that simple five.

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Speaker 3: Percent sound of the five percent revenue threshold. And then

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Speaker 3: you've got other companies as well that may produce something

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Speaker 3: for civilian purposes and that gets repurposed or weaponized and

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Speaker 3: you know, good example is Caterpillar bulldozers. The Norwegian Sovereign

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Speaker 3: Wealth Fund, the largest sovereign wealth funder the world are

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Speaker 3: ustollar two billion, two trillion, sorry, two trillion dollar fund.

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Speaker 3: Massive fund divested from Caterpillar a week ago on the

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Speaker 3: basis that their equipment was being used in Gaza for

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Speaker 3: demolition effect being weaponized and the company was not doing

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Speaker 3: enough to stop that. You know, pathfinder, We actually divested

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Speaker 3: Caterpillar in November twenty twenty three, but large investors like

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Speaker 3: in norwayia going down that pathway as well.

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Speaker 1: I guess if we look at a different kind of

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Speaker 1: conflict in the political climate, literally around climate, you're seeing

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Speaker 1: a lot of talk about countries looking at the Paris

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Speaker 1: Accord and whether they want to renegotiate.

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Speaker 4: That or out of it.

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Speaker 1: The US has I think maybe Eritrea and Yemen and

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Speaker 1: a couple of others have too. New Zealand's discussing this now.

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Speaker 1: I don't know how seriously it's being raised in the

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Speaker 1: political debate. What sort of uncertainty does that create?

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Speaker 3: Yeah, you're right, it has been floated recently. Should New

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Speaker 3: Zealand renegotiate to withdraw? You know what I've seen is

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Speaker 3: and again we need certainty of the rules on what

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Speaker 3: is applying it into the future so businesses can plan

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Speaker 3: can plan around that. I've seen farmers advocates and our

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Speaker 3: Prime minister say we'd be mad to pull out of Paris.

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Speaker 3: And the reason for that are on economic grounds is

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Speaker 3: there would be retaliation against New Zealand. It has baked

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Speaker 3: into our trade agreements with the European Union. There would

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Speaker 3: be problems for US selling product in the European Union

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Speaker 3: if we pulled out. It makes no economic sense to

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Speaker 3: do that, let alone putting aside the climate argument. Just

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Speaker 3: on economic grounds, it would not be good for New Zealand.

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Speaker 1: But again, you've seen a lot of this kind of

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Speaker 1: sovereign risk effect I suppose. I mean here they're talking

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Speaker 1: about it with regards to whether or not some of

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Speaker 1: those big power generating companies that are on a renewables

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Speaker 1: path but also are still using a bit of coal

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Speaker 1: may or may not be broken up. You look in

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Speaker 1: the States, all kinds of measures to support green technology

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Speaker 1: and solar and so on were sort of pushed aside.

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Speaker 1: And that one big, beautiful built act makes it really

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Speaker 1: complicated to make a decision about what is actually a

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Speaker 1: safe investment, even if you're trying to invest sustainably, responsibly, ethically,

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Speaker 1: however you want to put it.

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Speaker 3: Yeah, look on that front of you, right, the one

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Speaker 3: big beautiful act. You know, it was hard on renewables companies,

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Speaker 3: the renewable sector, but the reality is the world is

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Speaker 3: transitioning to a lower carbon future. And so you know,

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Speaker 3: we can't turn off fossil fuels today and expect civilization

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Speaker 3: to function. But we have to recognize we are transitioning,

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Speaker 3: and we have to realicate cap all to renewables in

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Speaker 3: lower carbon future, and those companies are going to thrive

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Speaker 3: long term. That's where the money's going to be made.

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Speaker 3: There is investment going into fossil fuels globally. You know,

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Speaker 3: I would question the sanity of a lot of that

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Speaker 3: investment given on a ten twenty year horizon. A lot

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Speaker 3: of those assets may have no value as we decarbonize,

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Speaker 3: They may not be as useful as they are now.

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Speaker 3: They may have a short time horizon.

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Speaker 1: So is that the sort of a time horizon that

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Speaker 1: pathfinder uses ten twenty years?

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Speaker 3: Well with our setting our vision for the future. So

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Speaker 3: our vision is to fund the transformation to a better world.

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Speaker 3: We were thinking one hundred years future when we describe

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Speaker 3: the world, and one hundred years we want and what that

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Speaker 3: means for distribution of wealth, what it means for ecosystems.

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Speaker 3: How fast that transition had happened. Well, it needs to

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Speaker 3: happen faster, run and slower to keep within the boundaries

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Speaker 3: that the planet can cope with. But you know, it's

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Speaker 3: not going to happen within years. It's going to be

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Speaker 3: within decades.

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Speaker 1: There's also been some researcher I think recently around people's

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Speaker 1: appetite for this kind of thing. Something like forty nine

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Speaker 1: percent of investors that mindful money we're talking to saying, hey, look,

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Speaker 1: we would consider a switch to ethical in five years.

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Speaker 4: What does that even mean?

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Speaker 1: I mean, like, surely if you think something is worthwhile,

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Speaker 1: you're going to get into it now.

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Speaker 4: And if you're saying in.

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Speaker 1: Five years that's like we should catch up for a coffee,

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Speaker 1: It's like it's not going to happen. How real is

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Speaker 1: that appetite?

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Speaker 3: You think? So with that was actually within the next

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Speaker 3: five years, So not in you know, in five years time,

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Speaker 3: but within the next five years. And I think that

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Speaker 3: just reflects you know, people are time poor at the moment,

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Speaker 3: they realize they need to do a lot of research

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Speaker 3: to weigh up the options, and they know it's it's

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Speaker 3: complex and nuance and at the moment when it comes

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Speaker 3: to money in mortgages, household budgets probably take priority over

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Speaker 3: thinking about am I going to move my KBI savers?

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Speaker 3: Another part of for example, it's something on their radar,

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Speaker 3: but it may not be an immediate priority. So I

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Speaker 3: think part of it is about time. Part of it

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Speaker 3: is not knowing where to get the right research and

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Speaker 3: trusting the research because it's quite a big decision to

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Speaker 3: make to move in line with your values. And I

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Speaker 3: just encourage people to go to the website which did

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Speaker 3: the research, which is mindful money dot nz independent. They

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Speaker 3: do all the thinking for you in terms of the

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Speaker 3: transparency of beholdings, what may be in a keep savior

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Speaker 3: that's good or bad, and providing returns and feed information

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Speaker 3: as well. So they've done the thinking and provided the

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Speaker 3: data there. I just encouraged people to visit that website

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Speaker 3: to accelerate the five years to something closer to now.

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Speaker 1: You mentioned trust's an important thing, and you mentioned labeling

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Speaker 1: that's an important thing too. I just wanted to mention

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Speaker 1: you had a few words with the regulator of the

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Speaker 1: FMA last year around an issue that they'd picked up. Yeah,

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Speaker 1: and I comparaphrase it or you can talk, but basically

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Speaker 1: they'd said, how yours was a completely ethical product, and

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Speaker 1: then there was a bit of a reference to a

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Speaker 1: couple of particular companies that were in the portfolio that

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Speaker 1: had engaged in limited animal testing. Yeah, and also there

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Speaker 1: was an exception or carve out for Contact because although

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Speaker 1: it was thermal coal, you felt it was on a track,

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Speaker 1: but you hadn't kind of made that super clear.

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Speaker 3: Is that what was the problem? Yeah? Look, please then

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Speaker 3: thank you for raising that. If you think about investing,

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Speaker 3: there's sort of three sides to what we do. There's

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Speaker 3: the policy of how we invest in our ethical approach,

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Speaker 3: there's our portfolio of what we're actually invested in. And

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Speaker 3: the third limb is how we talk about it and

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Speaker 3: how we tell people about it. And we let ourselves

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Speaker 3: down with how we talked about it and tell people

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Speaker 3: about it. And the example you gave was Contact. Our

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Speaker 3: investment policy says we won't invest in fossiphuel expiration production

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Speaker 3: or companies that burn coal to produce electricity. We made

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Speaker 3: an exemption for contact energy on the basis that it

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Speaker 3: generates power through burning fossil fuels. However, they have a

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Speaker 3: pathway to net zero and its credible pathway. They're regarded

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Speaker 3: as a leader in the world around decalbanization. In our

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Speaker 3: advertising we explain we don't invest in possibil companies. We

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Speaker 3: should have said either mentioned the contact a little less

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Speaker 3: as a little astracts and mentioned contact, or we should

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Speaker 3: have just said FOSSi fuel extraction and production. But we

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Speaker 3: had that exception for FOSSi fuel. Similarly, with animal testing,

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Speaker 3: we ran some advertizing it said we don't invest in

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Speaker 3: companies that test on animals. We have granted a small

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Speaker 3: number of exceptions, and often there in what we call

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Speaker 3: the transformational bucket, which is a company that's producing synthetic skin,

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Speaker 3: but unfortunately, to prove so this is going to do

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Speaker 3: away with the use of animal products in the future,

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Speaker 3: but to prove the product works, I need to test

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Speaker 3: it on animals. So we've granted them an exception on

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Speaker 3: the basis that their product is transformational and we'll change

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Speaker 3: that category and the use of animal products.

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Speaker 1: So that's a long horizon approach rather than just sort

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Speaker 1: of looking at the immediate movements.

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Speaker 3: Yeah, and like you said, we should have mentioned that

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Speaker 3: at the strengthen talked about that in our advertising.

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Speaker 1: As an ethical fund manager to suspect that your investors

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Speaker 1: aren't just looking for return. They want you to vocalize

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Speaker 1: that and the kind of votes that you make or

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Speaker 1: the kind of communications you have with the company, and.

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Speaker 3: The way we talk to companies, the way we invest

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Speaker 3: And that's a challenge from the perspective of there is

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Speaker 3: no perfect company. So every company you invest in has

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Speaker 3: both got attributes and bad attributes, and you need to

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Speaker 3: make trade offs between the two. And I'll give you

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Speaker 3: an example of Tesla. So Tesla we invested in years

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Speaker 3: ago because we love the mission of Elon Musk to

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Speaker 3: essentially drive decarbonization not just the car you have in

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Speaker 3: the garage, but of transport. And so he was leading

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Speaker 3: in the transport in the decombanization, electrification space.

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Speaker 1: And apouting batteries in just about every driveway. Right, So

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Speaker 1: that's a whole other thing that's happening too.

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Speaker 3: Yeah, So there's that powerful drive. But you look at

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Speaker 3: the company from an ESG perspective, like governance, pretty bad

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Speaker 3: governance right, that's one person who's controlling the show, and

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Speaker 3: it's always going to lead trouble in large companies. Environmental

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Speaker 3: and social issues around supply chain, for example, and where

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Speaker 3: you get the rear earth and minerals from. We sort

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Speaker 3: of weighed that the mission, you know, outweighed the the

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Speaker 3: ESG harms. But more recently we've said, actually, other car

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Speaker 3: companies are now catching up to Tessa and have followed

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Speaker 3: that leadership. We don't need to invest in the company

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Speaker 3: with the concerns we have around So where she sold

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Speaker 3: it earlier this year, you.

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Speaker 4: Have sold all your testa Yeah, wow, yeah, what are

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Speaker 4: you buying?

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Speaker 3: What are we buying? Oh, look we've got you know,

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Speaker 3: there's there's plenty of tech companies, you know mag seven,

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Speaker 3: there's fantastic opportunities there. But Tesla is no longer in

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Speaker 3: the portfolio.

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Speaker 4: Wow, big moment.

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Speaker 1: If I can turn just back locally again, We've sort

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Speaker 1: of got an interesting political climate, I would say, where

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Speaker 1: you've got a lot of phrases thrown around about red

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Speaker 1: and green tape, and I think one of the parties

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Speaker 1: has had to crack up woke lending the idea that

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Speaker 1: banks have got both climate related disclosures, but also maybe

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Speaker 1: lending preferentially on broadly green or renewable topics, and that

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Speaker 1: might be costing others who don't want to necessarily undertake

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Speaker 1: that kind of lending. All of that sort of stuff.

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Speaker 1: Does that send What sort of a message do you

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Speaker 1: think that sends to potential investors that are looking at

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Speaker 1: New Zealand and from you know, from your point of

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Speaker 1: view as a fund manager, do do you have anything

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Speaker 1: to say about that?

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Speaker 3: The political environment is complicated and polarized globally and we're

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Speaker 3: seeing parts of that in New New Zealand as well.

437
00:22:42,240 --> 00:22:44,560
Speaker 3: You know, what are international investors think of New Zealand.

438
00:22:46,040 --> 00:22:50,360
Speaker 3: Sure they're interested in New Zealand because we're safe, secure,

439
00:22:50,560 --> 00:22:57,200
Speaker 3: politically stable, you know, legal system is robust, We're perceived

440
00:22:57,200 --> 00:22:59,760
Speaker 3: as green. But the challenge on the flip side is

441
00:23:00,520 --> 00:23:03,760
Speaker 3: we less than point two percent of global equity markets.

442
00:23:04,200 --> 00:23:06,639
Speaker 3: And when you look at our listed companies, we've got

443
00:23:06,640 --> 00:23:08,680
Speaker 3: a lot of infrastructure and power companies, but we're really

444
00:23:08,760 --> 00:23:12,000
Speaker 3: lacking in high growth tech companies in our listed markets.

445
00:23:12,400 --> 00:23:16,880
Speaker 3: So for international investors, you know, we're interesting, but we're

446
00:23:17,240 --> 00:23:20,080
Speaker 3: kind of at the margins. Where I think they're interested

447
00:23:20,200 --> 00:23:22,800
Speaker 3: is in the private market space. There's a lot going

448
00:23:22,840 --> 00:23:27,800
Speaker 3: on in New Zealand with private companies, green technology space,

449
00:23:29,520 --> 00:23:33,240
Speaker 3: SaaS companies, some really really interesting companies in New Zealand

450
00:23:33,280 --> 00:23:36,240
Speaker 3: and they're attracting international attention in capital and is.

451
00:23:36,280 --> 00:23:38,560
Speaker 1: That the kind of thing that Pathfinder is also exploring

452
00:23:38,600 --> 00:23:41,400
Speaker 1: opportunities with, either from the funds management side or even

453
00:23:41,440 --> 00:23:44,359
Speaker 1: from the k save side, because we're seeing a little

454
00:23:44,359 --> 00:23:47,959
Speaker 1: bit more private private equity exploration thereby some of those

455
00:23:48,040 --> 00:23:49,280
Speaker 1: Keyisaver funds an't.

456
00:23:49,040 --> 00:23:51,600
Speaker 3: We Yeah, Look, I've been an advocate for over a

457
00:23:51,680 --> 00:23:55,600
Speaker 3: decade for keypsaver investing into private assets before long before

458
00:23:55,600 --> 00:23:57,920
Speaker 3: I had to KIVSAB. We'll ran path one a KEPSAB.

459
00:23:59,119 --> 00:24:01,960
Speaker 3: I think it's great for Enzidink to create jobs and

460
00:24:02,040 --> 00:24:06,080
Speaker 3: drive innovation and keep our talented people in the country.

461
00:24:06,400 --> 00:24:09,600
Speaker 3: It's also great from an investment a portfolio perspective for

462
00:24:09,800 --> 00:24:13,040
Speaker 3: KYP Saver investors long term to have access to the

463
00:24:13,119 --> 00:24:17,240
Speaker 3: SASSE class. So yes, a Pathfinder, we're invested in great

464
00:24:17,240 --> 00:24:19,960
Speaker 3: companies and New Zealand companies like Mint Innovation, which extracts

465
00:24:20,400 --> 00:24:25,200
Speaker 3: metals from e waste, Loadstone which is producing solar energy

466
00:24:25,280 --> 00:24:28,280
Speaker 3: for New Zealand. The cheapest energy source in New Zealand.

467
00:24:29,200 --> 00:24:31,800
Speaker 3: You know there's a host social housing. We've invested in

468
00:24:32,480 --> 00:24:36,479
Speaker 3: several social housing social housing projects, commercial return, but at

469
00:24:36,480 --> 00:24:38,040
Speaker 3: the same time it's great social benefit.

470
00:24:38,560 --> 00:24:39,439
Speaker 4: None of them are listing.

471
00:24:39,600 --> 00:24:41,160
Speaker 1: None of them look like they have a will list,

472
00:24:41,320 --> 00:24:43,960
Speaker 1: to be quite honest, I mean, is that a problem

473
00:24:44,040 --> 00:24:46,640
Speaker 1: that we're not getting that kind of i PO level

474
00:24:47,720 --> 00:24:50,160
Speaker 1: disclosure and exposure so that people can take a look,

475
00:24:50,359 --> 00:24:51,800
Speaker 1: a very clear look at the market and a bit

476
00:24:51,800 --> 00:24:53,000
Speaker 1: of liquidity in there as well.

477
00:24:53,280 --> 00:24:55,200
Speaker 3: Yeah, and look, hopefully some of them will list and

478
00:24:55,280 --> 00:24:57,680
Speaker 3: choose to list in New Zealand rather than listen in Australia.

479
00:24:58,400 --> 00:25:02,520
Speaker 3: But from a keyvsaver because their private asseats and they're

480
00:25:02,560 --> 00:25:04,919
Speaker 3: not liquid, they can only ever be a small part

481
00:25:04,960 --> 00:25:08,040
Speaker 3: of a kiwisaver. So for us it's around five percent

482
00:25:08,080 --> 00:25:10,639
Speaker 3: of our key savers in these private as seats. But

483
00:25:10,800 --> 00:25:13,760
Speaker 3: because the because of the portability of keep sav everyone

484
00:25:13,800 --> 00:25:16,640
Speaker 3: can transfer the KEYPSAB to another provider at any time

485
00:25:17,440 --> 00:25:19,919
Speaker 3: it's appropriate for it to be. It's important, but it's

486
00:25:19,960 --> 00:25:21,200
Speaker 3: a small part of the KIW saber.

487
00:25:21,320 --> 00:25:23,320
Speaker 1: Would you like to see that twitched or changed it

488
00:25:23,400 --> 00:25:26,760
Speaker 1: all slightly? Just a little bit that five percent is

489
00:25:27,960 --> 00:25:28,960
Speaker 1: sorry that that's what that's.

490
00:25:28,880 --> 00:25:30,680
Speaker 3: What we see it. That's what we see it. And

491
00:25:32,119 --> 00:25:34,720
Speaker 3: because there is no guidance in New Zealand a round,

492
00:25:35,240 --> 00:25:38,160
Speaker 3: so providers like us and separ other providers are really

493
00:25:38,200 --> 00:25:40,560
Speaker 3: focused on the private seat space. We're sort of trying

494
00:25:40,560 --> 00:25:42,359
Speaker 3: to work out what is the right right level. We've

495
00:25:42,480 --> 00:25:43,919
Speaker 3: been quite conserve a bit of it, setting it at

496
00:25:43,920 --> 00:25:44,399
Speaker 3: five percent.

497
00:25:44,840 --> 00:25:47,320
Speaker 1: Yeah, I mean you mentioned that there's some data out

498
00:25:47,400 --> 00:25:51,119
Speaker 1: on key we Saver as a scheme broadly across the

499
00:25:51,320 --> 00:25:53,400
Speaker 1: across the board just today, one hundred and seventy five

500
00:25:53,440 --> 00:25:56,080
Speaker 1: thousand transfers within schemes in the last year. That's probably

501
00:25:56,119 --> 00:25:58,639
Speaker 1: the highest that's ever been. So people are switching, they

502
00:25:58,680 --> 00:26:01,840
Speaker 1: are making more are definite choices about where they want

503
00:26:01,880 --> 00:26:03,960
Speaker 1: to place their keep saver. Is that are you seeing

504
00:26:04,040 --> 00:26:05,200
Speaker 1: let people go or people come?

505
00:26:05,640 --> 00:26:10,000
Speaker 3: We're seeing people come. Yeah, absolutely, we're seeing people join pathfinders.

506
00:26:10,080 --> 00:26:14,439
Speaker 3: So every month for us, were yet new people joining

507
00:26:14,680 --> 00:26:16,920
Speaker 3: and on pleased to say our tune rate, which is

508
00:26:16,960 --> 00:26:19,840
Speaker 3: people leaving, is way lower than the market average of

509
00:26:19,920 --> 00:26:20,520
Speaker 3: a pathfinder.

510
00:26:20,760 --> 00:26:24,160
Speaker 1: So the stats out I think key we sab funds

511
00:26:24,200 --> 00:26:26,440
Speaker 1: as that would have been in March probably one hundred

512
00:26:26,440 --> 00:26:31,040
Speaker 1: and twenty three billion invested, which is pretty sizeable, sort

513
00:26:31,040 --> 00:26:34,200
Speaker 1: of a figure one point five six of that in

514
00:26:34,400 --> 00:26:37,480
Speaker 1: what you would call socially responsible according to the definition

515
00:26:37,600 --> 00:26:40,680
Speaker 1: that the FMA provided, that seems like quite a small number.

516
00:26:40,720 --> 00:26:43,560
Speaker 1: We're talking about one percent of KEI WE SAB funds

517
00:26:43,600 --> 00:26:47,280
Speaker 1: being in socially responsible funds. Do you see that picture

518
00:26:47,280 --> 00:26:48,440
Speaker 1: when you look across the market.

519
00:26:48,880 --> 00:26:51,520
Speaker 3: No, Look, I don't see that picture, and I question

520
00:26:51,720 --> 00:26:54,439
Speaker 3: the categorization that's been used to come up with one

521
00:26:54,480 --> 00:26:57,320
Speaker 3: point five percent. I believe the number is much much higher.

522
00:26:57,119 --> 00:27:00,400
Speaker 1: Than one point five to six billion, I think. But anyway, yeah, yeah, yeah, okay,

523
00:27:00,560 --> 00:27:04,400
Speaker 1: so that's that's that's a little over one percent. Then, look,

524
00:27:04,600 --> 00:27:06,879
Speaker 1: I would say it's much higher than that. You know,

525
00:27:06,920 --> 00:27:07,480
Speaker 1: a pathfinder.

526
00:27:07,520 --> 00:27:10,040
Speaker 3: We're a smaller provider with about five hundred and fifty

527
00:27:10,080 --> 00:27:16,560
Speaker 3: million in KII SABER, but the values driven sustainability driven

528
00:27:17,080 --> 00:27:19,760
Speaker 3: key WE SABER choices of New Zealanders is much much

529
00:27:19,800 --> 00:27:21,520
Speaker 3: higher up than that. I think it's borne out in

530
00:27:21,600 --> 00:27:24,600
Speaker 3: the mydful money of research. We talked about twenty percent

531
00:27:24,640 --> 00:27:27,600
Speaker 3: of kiwis, you know, in responding to the survey are

532
00:27:27,640 --> 00:27:32,080
Speaker 3: saying they're invested in ethical law sustainable funds. That doesn't

533
00:27:32,119 --> 00:27:34,440
Speaker 3: quite match up with the fma's categorization.

534
00:27:34,640 --> 00:27:36,399
Speaker 1: Yeah, I'm according to them, there are three times as

535
00:27:36,480 --> 00:27:40,480
Speaker 1: many four and a half four point six billion in cash, right,

536
00:27:40,560 --> 00:27:43,280
Speaker 1: I mean it's easy to count cash, right, cash as cash. Yeah,

537
00:27:43,600 --> 00:27:46,680
Speaker 1: but I guess your definition of what's a socially responsible

538
00:27:46,720 --> 00:27:49,040
Speaker 1: fund you might be a bit trickier. And that takes

539
00:27:49,119 --> 00:27:50,560
Speaker 1: us back to where we started, right.

540
00:27:50,760 --> 00:27:53,160
Speaker 3: Yeah, Look, it's how do you label it and what's

541
00:27:53,480 --> 00:27:55,639
Speaker 3: It's not just the labeling, it's actually the reality of

542
00:27:55,760 --> 00:27:58,600
Speaker 3: what is in that fund and how has that fund invested?

543
00:27:58,640 --> 00:28:01,560
Speaker 3: What are the values that are the values that are

544
00:28:01,640 --> 00:28:03,160
Speaker 3: driving the investment process?

545
00:28:04,560 --> 00:28:06,399
Speaker 1: Again, Ken we saver just in the last of a well,

546
00:28:06,440 --> 00:28:08,359
Speaker 1: it's someddenly to become a political football. You've got one

547
00:28:08,400 --> 00:28:10,040
Speaker 1: of the big parties saying, hey, we want to make

548
00:28:10,080 --> 00:28:12,320
Speaker 1: it compulsory, we want to take it to ten percent.

549
00:28:12,440 --> 00:28:15,760
Speaker 1: They're not quite clear on the details the costs. Is

550
00:28:15,840 --> 00:28:19,399
Speaker 1: there a risk there if people tinkle with can we savor?

551
00:28:19,480 --> 00:28:22,159
Speaker 1: That it kind of kills some of that ability to

552
00:28:23,119 --> 00:28:26,560
Speaker 1: transform the economy, to lift people's savings and to provide

553
00:28:26,640 --> 00:28:30,720
Speaker 1: that potential capital into those private assets that you're talking about.

554
00:28:30,920 --> 00:28:34,399
Speaker 3: Yeah, I think consistency of the rules around key WE

555
00:28:34,520 --> 00:28:39,000
Speaker 3: saver is really really important because people need confidence of

556
00:28:39,120 --> 00:28:42,080
Speaker 3: what the rules are and understanding when they can access it,

557
00:28:42,800 --> 00:28:46,640
Speaker 3: so you can open your qpsaber at sixty five. It's

558
00:28:46,760 --> 00:28:51,080
Speaker 3: really important people have that certainty and know their contributions

559
00:28:51,120 --> 00:28:53,440
Speaker 3: will be accessed and it will provide for them in retirement.

560
00:28:54,440 --> 00:28:57,680
Speaker 3: The increase ten percent that one of the parties has

561
00:28:57,760 --> 00:29:03,560
Speaker 3: floated in Australia it's twelve is the contribution from employers,

562
00:29:03,800 --> 00:29:06,200
Speaker 3: which is why their balances are so high in Australia,

563
00:29:06,240 --> 00:29:08,080
Speaker 3: which is why Australians are probably going to have a

564
00:29:08,120 --> 00:29:10,560
Speaker 3: better retirement than New Zalanders. We need to lift the

565
00:29:10,600 --> 00:29:12,920
Speaker 3: savings rate in New Zealand. We've got to be careful

566
00:29:12,960 --> 00:29:15,200
Speaker 3: how we do that with this that people can afford

567
00:29:15,240 --> 00:29:18,720
Speaker 3: to put much higher contributions into their quivsaber and equally

568
00:29:19,120 --> 00:29:20,760
Speaker 3: it's a burden. You can't shift it all on to

569
00:29:20,800 --> 00:29:23,040
Speaker 3: the employers. So the best way to do it is,

570
00:29:23,200 --> 00:29:24,960
Speaker 3: in my mind, has actually come up with a ten

571
00:29:25,040 --> 00:29:28,600
Speaker 3: year plan and say over the next ten years we're

572
00:29:28,600 --> 00:29:30,880
Speaker 3: going to be increasing contributions. This is what it looks like,

573
00:29:31,240 --> 00:29:34,160
Speaker 3: and step it out in a really gentle, really well planned,

574
00:29:34,200 --> 00:29:35,360
Speaker 3: well signaled.

575
00:29:34,960 --> 00:29:37,400
Speaker 4: Way and try and get everybody to sign up to

576
00:29:37,440 --> 00:29:39,600
Speaker 4: agree to it along the way. Good luck with that.

577
00:29:40,560 --> 00:29:45,080
Speaker 3: Well, I don't think people necessarily disagree with we need

578
00:29:45,160 --> 00:29:47,760
Speaker 3: to save more for retirement. It's just where does a

579
00:29:47,800 --> 00:29:50,000
Speaker 3: burden fall and over what time period? And that's what

580
00:29:50,120 --> 00:29:52,400
Speaker 3: we need to be really clear about is the fairness

581
00:29:52,480 --> 00:29:55,360
Speaker 3: of the sharing and spreading it over a long time period.

582
00:29:55,680 --> 00:29:57,600
Speaker 1: It's a lot to think about. Thank you, John, and

583
00:29:57,680 --> 00:29:59,920
Speaker 1: thank you all for your time, whether you will watching,

584
00:30:00,200 --> 00:30:03,560
Speaker 1: all listening. We know that time is precious and we

585
00:30:03,720 --> 00:30:06,000
Speaker 1: want to know what you thought about this, So let

586
00:30:06,120 --> 00:30:09,320
Speaker 1: us know for us kumatu that shared lunch for now,