Speaker 1: Kyoda.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented by the New Zealand Herald, A chance
Speaker 2: for New Zealand to lead change.
Speaker 1: In the world of ethical investing.
Speaker 2: As of last year, more than half a billion dollars
Speaker 2: of New Zealander's Kiwisaver and other retail investments were lent
Speaker 2: to countries on a high alert for human rights violations.
Speaker 2: The new paper from MOTU Research urges fund managers and
Speaker 2: industry bodies to lift standards. But what does ethical investing
Speaker 2: mean and how can you tell how your funds are
Speaker 2: being used? Today? On the Front Page, lead researcher Anne
Speaker 2: Marie Brook is with us to break down the paper
Speaker 2: and how we might be able to be socially responsible
Speaker 2: with our investment instuments. So, Anne Marie, can you explain
Speaker 2: the main focus and purpose I suppose of this research.
Speaker 3: Yeah, So, this research is all about helping people get
Speaker 3: more insight into what their money is supporting when they invest.
Speaker 3: So we wanted to find out what extent the money
Speaker 3: and all of our key we Saver accounts is being
Speaker 3: lent to countries with good versus bad human rights practices,
Speaker 3: And I mean not everyone may be aware that in
Speaker 3: their key saver accounts there's a mix of investments across
Speaker 3: different types of assets, so it includes both shares and companies,
Speaker 3: and then also investments and government bonds, and it's that
Speaker 3: government bond part that we're focused on. So government, you know,
Speaker 3: investments and government bonds are essentially loans to the governments
Speaker 3: who have issued those bonds. And so the question then
Speaker 3: is which governments do New Zealanders want to be lending to.
Speaker 3: We looked at lending to governments at both ends of
Speaker 3: the human rights spectrum, so we looked at lending to
Speaker 3: the best performers and the worst performers.
Speaker 4: On the worst performance.
Speaker 3: Side, we found that about half a billion dollars is
Speaker 3: being linked lent to governments with the worst.
Speaker 4: Human rights performance. And the thing that people.
Speaker 3: Might be surprised to hear is that currently there's just
Speaker 3: no system for evaluating that. So there's some responsible investment
Speaker 3: certifications that focus mainly on investments and companies, so you know,
Speaker 3: you often hear, for example, research about you know, how
Speaker 3: much money and key sover is being invested in weapons
Speaker 3: manufacturers and things like that, but right now there's no
Speaker 3: system that monitors the kind of human through human rights
Speaker 3: lens investments in sovereign bonds government bonds, which is what
Speaker 3: all of us are doing through our KEE we saver,
Speaker 3: whether we know it or not. So we're really just
Speaker 3: wanting to, you know, bring more attention and insight into
Speaker 3: that part of the investment.
Speaker 2: That's which countries did report those high alerts for human
Speaker 2: rights abuses?
Speaker 1: And what does high alert even mean?
Speaker 4: Good question.
Speaker 3: So we use data from the Human Rights Measurement Initiative
Speaker 3: or HERMEI for short, which is a global NGO that
Speaker 3: consistently tracks human rights across countries. And HERMI looks at
Speaker 3: a range of rights, so includes things like killings and torture,
Speaker 3: freedom of speech, and rights to things like education and health.
Speaker 3: And then we defined the worst performers or the high
Speaker 3: alert countries are the ones that are in the bottom
Speaker 3: ten percent of the world across those rights, plus any
Speaker 3: countries that have been reliably accused of genocide. And based
Speaker 3: on that definition, there were four worst performing countries that
Speaker 3: Kiwi Saber Funds are currently investing in and they are China, Israel,
Speaker 3: Kata and Saudi Arabia.
Speaker 2: How do bank managed funds compare to non bank funds
Speaker 2: in terms of those investments in these high alert countries.
Speaker 3: The banks are managing by far the majority of kysaber
Speaker 3: and retail investment assets in New Zealand, so I think
Speaker 3: in total they are managing two thirds of all investments
Speaker 3: in New Zealand. And what we found is that they
Speaker 3: are seventy five percent of the investments in the worst
Speaker 3: performing countries are coming from the bank funds, so that's
Speaker 3: slightly the bank funds are slightly more likely to invest
Speaker 3: in the worst performing funds than the non bank funds.
Speaker 3: This I should also mention this research was a snapshot
Speaker 3: in time as of March twenty twenty four, and there
Speaker 3: have been changes since and so when we're talking about
Speaker 3: bank funds, we included ben Z funds at that date,
Speaker 3: but since since then Benz has sold those assets to
Speaker 3: Harbor Asset Management, so we would get slightly different results now.
Speaker 2: And so can people check what their can we savor
Speaker 2: is going towards?
Speaker 4: In the paper, we do look at what.
Speaker 3: Was the case as of March twenty twenty four, but
Speaker 3: we know that things will have changed since then. The
Speaker 3: main point of this research was not to provide up
Speaker 3: to date detail on individual KVSAP funds. There was more
Speaker 3: to point out the fact that there is no system
Speaker 3: that allows individual people to get that up to date information.
Speaker 3: So we're calling for industry bodies like the Responsible Investment
Speaker 3: Association of Australasia and other organizations like Mindful Money, which
Speaker 3: is a New Zealand charity, to.
Speaker 4: Make it easier.
Speaker 3: They're already kind of offering some certification programs and Mindful
Speaker 3: Money have an excellent website where you can go and
Speaker 3: look at your kiwisaver and see how it's investing in
Speaker 3: companies that are, you know, for example, fossil fuel producers
Speaker 3: or weapons manufacturers. But currently that information is not available
Speaker 3: on which of each kiwisaver funder and to the extent,
Speaker 3: which of it's investing in the best versus the worst countries.
Speaker 3: So yeah, that's kind of the key point really that
Speaker 3: we're trying to draw attention to the fact that this
Speaker 3: missing information. Individuals can contact their key we saver provider
Speaker 3: and ask for information about tell their provider that they
Speaker 3: care about this, and even consider switching providers if their
Speaker 3: current provider is not taking this issue seriously.
Speaker 2: Is there any evidence of I suppose rights washing or
Speaker 2: is even misleading ethical labeling among these retail funds.
Speaker 3: No, I wouldn't say we found any direct evidence of that.
Speaker 3: But what we did find is that the existing certifications
Speaker 3: that are available are not currently set up to evaluate
Speaker 3: this particular asset.
Speaker 4: Class of investments.
Speaker 3: So for example, and you know, and I want to
Speaker 3: emphasize also that this field of responsible investment is very
Speaker 3: much emerging. Ten or twenty years ago, you know, the
Speaker 3: sort of certifications that we have now didn't even exist.
Speaker 3: So I like to think that it's going to continue
Speaker 3: to move in the right direction in the is to come.
Speaker 3: But for example, we found that sixty seven percent of
Speaker 3: the lending to the worst performing countries was coming from
Speaker 3: funds that have a rare certification. So that's some kind
Speaker 3: of responsible investment certification from the Responsible Investment Association Australasia.
Speaker 3: And now that's I wouldn't call that rights washing because
Speaker 3: what RIA say is that they're really just telling you
Speaker 3: whether what the fund is claiming is actually true to label.
Speaker 3: And generally what they're doing is they might be telling
Speaker 3: you that a fund's climate related claims, for example, are valid.
Speaker 3: It's just not telling you anything at all about how
Speaker 3: much of the fund might be being lent to governments
Speaker 3: with very poor human rights record.
Speaker 5: The typical thing for funds is that they want to
Speaker 5: make money, so they tend to chase short term returns,
Speaker 5: and often those short term returns are in companies that
Speaker 5: do things that are pretty terrible. And we survey the
Speaker 5: public each year to find out what people want to avoid,
Speaker 5: and they want to avoid things like weapons, but also
Speaker 5: human rights violations, animal cruelty, fossil fuels, and social harm
Speaker 5: like tobacco and gambling.
Speaker 4: And so on.
Speaker 1: So what needs to be done? What are the next steps?
Speaker 1: Because the public has changed the tide, so to speak.
Speaker 2: Before you mentioned the weapons manufacturing, everyone was up in
Speaker 2: arms about their can we saver retirement investments going into
Speaker 2: things like weapons or.
Speaker 1: Drugs or war in general? So we've done it before,
Speaker 1: how can we do it again?
Speaker 4: Yeah?
Speaker 3: Absolutely. Each individual has quite a lot of power in
Speaker 3: terms of where they direct their chemisab balances, and even
Speaker 3: if their balances are relatively small, if they talk to
Speaker 3: their friends and family about it, it can really.
Speaker 4: Add up to quite a growing movement.
Speaker 3: And it's definitely that desire by individual kiwis to be
Speaker 3: investing more responsibly. That has led to a lot of
Speaker 3: these shifts we've already seen, so in terms of I mean,
Speaker 3: I would say there's just tons of opportunities here.
Speaker 4: And when we looked at the best.
Speaker 3: Performing countries, so we looked at which funds are invested
Speaker 3: only in the best performing countries.
Speaker 4: And you know, there are thirty five.
Speaker 3: Countries in the world that are in that kind of
Speaker 3: best performing category, and thirty one of them have really
Speaker 3: significant and liquid bond markets, so they're very investable. But
Speaker 3: what we found is that there's not very not very
Speaker 3: many funds out are investing exclusively in a diversified range
Speaker 3: of those best performing countries.
Speaker 4: So for the funds themselves.
Speaker 3: I would say there's a huge opportunity for them to
Speaker 3: offer more access to investments in those best performing countries.
Speaker 3: For industry bodies, I think there's a huge opportunity to
Speaker 3: set up systems to consider human rights more consistently when
Speaker 3: it comes to investing in government bonds. And then for
Speaker 3: individual people themselves, you know, the opportunity is to tell
Speaker 3: their provider that they care and consider switching if their
Speaker 3: provider doesn't care, and if they do, does.
Speaker 1: Something like that need government intervention.
Speaker 3: So New Zealand has good disclosure regulation, so funds are
Speaker 3: required to disclose exactly which assets are invested in, and
Speaker 3: it was because of that regulatory framework that we were
Speaker 3: able to do this research, which I would say is
Speaker 3: quite groundbreaking globally because most other countries don't have a
Speaker 3: data set that would allow this type of research to
Speaker 3: be done. But yet there is more that can be
Speaker 3: done in the sense that often what the responsible investment
Speaker 3: certifications focus on are the things that funds are required
Speaker 3: to do by under regulation. And so now there are
Speaker 3: increasing climate related disclosures and so that has led the
Speaker 3: certification programs to focus on more climate related stuff. So
Speaker 3: it is more regulation would be helpful, but I don't
Speaker 3: think it's necessary.
Speaker 2: So just to be clear, if I called up my
Speaker 2: provider and said I want information about how my money
Speaker 2: is being spent, how.
Speaker 1: Easy or difficult is it for me to get that information?
Speaker 4: It probably varies from provider to provider.
Speaker 3: Right now, there's an excellent website that Mindful Money Operate,
Speaker 3: where you can put in the name of your kivsaver
Speaker 3: and get all that information in terms of the company
Speaker 3: shares that your kevsaver invested in.
Speaker 4: It just hasn't yet been.
Speaker 3: Expanded to also include information on the government bonds that
Speaker 3: your key resaver is published in. So there's already platforms
Speaker 3: that exist that could give you that answer, you know,
Speaker 3: really easily without you even need are in needing to
Speaker 3: call your provider, but they haven't yet included this segment
Speaker 3: of the market, and so in the meantime you would
Speaker 3: need to call your provider and.
Speaker 4: Ask they should be able to answer your questions.
Speaker 1: So did you that for you as researchers?
Speaker 2: Did you have to ask individual each individual provider for
Speaker 2: that information for that snapshot in time?
Speaker 3: No, we got the data from all funds are required
Speaker 3: to disclose their asset holdings in the disclosed Register of
Speaker 3: the company's office, and that information is disclosed I think
Speaker 3: every six months.
Speaker 4: I might have that wrong.
Speaker 3: That's a data set that can be downloaded, but it's
Speaker 3: not very accessible to the individual person. So no, we
Speaker 3: didn't need And there's I think seven hundred and something
Speaker 3: kisov and retail investment funds that were included in that
Speaker 3: data set.
Speaker 2: How aware do you do you think New Zealanders are
Speaker 2: generally about the human rights profile of their investments.
Speaker 1: Do you think that they'll see this and be quite shocked?
Speaker 3: Some of them probably will be. It's probably something that
Speaker 3: a lot of people just haven't thought about before. We
Speaker 3: do know from surveys of New Zealanders that human rights
Speaker 3: is something that they care about in their investments, but
Speaker 3: I think people often their attention falls on the human
Speaker 3: rights practices of companies whose shares they own, So you know,
Speaker 3: is this company complicit in any kind of major human
Speaker 3: rights violations in terms of their business operations, And there's
Speaker 3: much less attention being given to the investments, what investments
Speaker 3: are supporting in terms of loans to government through purchases
Speaker 3: of selfign bonds. So yeah, I think it's probably just
Speaker 3: something that hasn't been on the horizon.
Speaker 2: And you mentioned that it's significantly easier here to get
Speaker 2: this information rather than the country's of a sentase.
Speaker 1: Do you think that this research.
Speaker 2: Will contribute to a global discussion about how ethical investments work.
Speaker 4: Yeah?
Speaker 3: Absolutely, this is groundbreaking research, not just for New Zealand
Speaker 3: but globally, because the sovereign bond asset class is being
Speaker 3: systematically ignored globally by responsible and ethical investing.
Speaker 4: Not completely.
Speaker 3: There are like individual ethical funds that take it very seriously,
Speaker 3: but the majority of the investment market is largely ignoring
Speaker 3: this issue.
Speaker 1: Do you think it's well, we're moving in a positive direction.
Speaker 2: I suppose when it comes to ethical investments, because it
Speaker 2: was not that long ago when we were talking about
Speaker 2: weapons manufacturing.
Speaker 3: Look, it's an evolving field, and I would say over
Speaker 3: the past couple of decades it has very much been
Speaker 3: moving in a positive direction and I see no reason
Speaker 3: why that won't continued.
Speaker 1: Thanks for joining us, Ann Marie.
Speaker 4: Thanks so much for having me pleasure.
Speaker 2: That's it for this episode of the Front Page. You
Speaker 2: can read more about today's stories and extensive news coverage
Speaker 2: at enzidherld dot co dot nz. The Front Page is
Speaker 2: produced by Jane Ye and Richard Martin, who is also
Speaker 2: our editor.
Speaker 1: I'm Chelsea Daniels.
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Speaker 2: behind the headlines.