WEBVTT - How KiwiSaver cash ends up backing countries accused of human rights abuses 0:00:05.800 --> 0:00:06.160 Kyoda. 0:00:06.240 --> 0:00:09.480 I'm Chelsea Daniels and this is the Front Page, a 0:00:09.560 --> 0:00:16.480 daily podcast presented by the New Zealand Herald, A chance 0:00:16.560 --> 0:00:19.480 for New Zealand to lead change. 0:00:19.200 --> 0:00:21.959 In the world of ethical investing. 0:00:22.600 --> 0:00:25.720 As of last year, more than half a billion dollars 0:00:25.760 --> 0:00:29.760 of New Zealander's Kiwisaver and other retail investments were lent 0:00:29.840 --> 0:00:34.479 to countries on a high alert for human rights violations. 0:00:35.000 --> 0:00:39.159 The new paper from MOTU Research urges fund managers and 0:00:39.320 --> 0:00:44.880 industry bodies to lift standards. But what does ethical investing 0:00:45.080 --> 0:00:48.319 mean and how can you tell how your funds are 0:00:48.400 --> 0:00:52.280 being used? Today? On the Front Page, lead researcher Anne 0:00:52.280 --> 0:00:55.000 Marie Brook is with us to break down the paper 0:00:55.360 --> 0:00:59.160 and how we might be able to be socially responsible 0:00:59.360 --> 0:01:06.120 with our investment instuments. So, Anne Marie, can you explain 0:01:06.240 --> 0:01:10.200 the main focus and purpose I suppose of this research. 0:01:10.800 --> 0:01:14.760 Yeah, So, this research is all about helping people get 0:01:14.840 --> 0:01:19.600 more insight into what their money is supporting when they invest. 0:01:20.040 --> 0:01:23.080 So we wanted to find out what extent the money 0:01:23.080 --> 0:01:25.560 and all of our key we Saver accounts is being 0:01:25.640 --> 0:01:28.959 lent to countries with good versus bad human rights practices, 0:01:29.520 --> 0:01:31.920 And I mean not everyone may be aware that in 0:01:31.959 --> 0:01:36.039 their key saver accounts there's a mix of investments across 0:01:36.080 --> 0:01:39.319 different types of assets, so it includes both shares and companies, 0:01:39.400 --> 0:01:42.200 and then also investments and government bonds, and it's that 0:01:42.319 --> 0:01:45.760 government bond part that we're focused on. So government, you know, 0:01:45.840 --> 0:01:49.440 investments and government bonds are essentially loans to the governments 0:01:49.480 --> 0:01:51.880 who have issued those bonds. And so the question then 0:01:52.080 --> 0:01:56.280 is which governments do New Zealanders want to be lending to. 0:01:56.920 --> 0:01:59.760 We looked at lending to governments at both ends of 0:01:59.760 --> 0:02:02.320 the human rights spectrum, so we looked at lending to 0:02:02.400 --> 0:02:04.559 the best performers and the worst performers. 0:02:05.480 --> 0:02:06.920 On the worst performance. 0:02:06.560 --> 0:02:10.240 Side, we found that about half a billion dollars is 0:02:10.280 --> 0:02:13.440 being linked lent to governments with the worst. 0:02:13.240 --> 0:02:16.440 Human rights performance. And the thing that people. 0:02:16.200 --> 0:02:18.720 Might be surprised to hear is that currently there's just 0:02:18.800 --> 0:02:23.000 no system for evaluating that. So there's some responsible investment 0:02:23.080 --> 0:02:28.120 certifications that focus mainly on investments and companies, so you know, 0:02:28.160 --> 0:02:30.920 you often hear, for example, research about you know, how 0:02:31.000 --> 0:02:34.200 much money and key sover is being invested in weapons 0:02:34.200 --> 0:02:37.800 manufacturers and things like that, but right now there's no 0:02:38.360 --> 0:02:42.680 system that monitors the kind of human through human rights 0:02:42.760 --> 0:02:47.960 lens investments in sovereign bonds government bonds, which is what 0:02:48.080 --> 0:02:49.760 all of us are doing through our KEE we saver, 0:02:49.840 --> 0:02:51.760 whether we know it or not. So we're really just 0:02:51.800 --> 0:02:55.280 wanting to, you know, bring more attention and insight into 0:02:55.680 --> 0:02:57.799 that part of the investment. 0:02:58.440 --> 0:03:03.680 That's which countries did report those high alerts for human 0:03:03.760 --> 0:03:04.720 rights abuses? 0:03:04.760 --> 0:03:06.720 And what does high alert even mean? 0:03:07.160 --> 0:03:07.760 Good question. 0:03:08.040 --> 0:03:11.400 So we use data from the Human Rights Measurement Initiative 0:03:11.639 --> 0:03:15.120 or HERMEI for short, which is a global NGO that 0:03:15.480 --> 0:03:20.400 consistently tracks human rights across countries. And HERMI looks at 0:03:20.440 --> 0:03:24.320 a range of rights, so includes things like killings and torture, 0:03:24.760 --> 0:03:28.400 freedom of speech, and rights to things like education and health. 0:03:28.960 --> 0:03:32.440 And then we defined the worst performers or the high 0:03:32.480 --> 0:03:34.880 alert countries are the ones that are in the bottom 0:03:34.960 --> 0:03:39.080 ten percent of the world across those rights, plus any 0:03:39.120 --> 0:03:43.480 countries that have been reliably accused of genocide. And based 0:03:43.480 --> 0:03:47.720 on that definition, there were four worst performing countries that 0:03:47.960 --> 0:03:52.200 Kiwi Saber Funds are currently investing in and they are China, Israel, 0:03:52.440 --> 0:03:54.240 Kata and Saudi Arabia. 0:03:54.360 --> 0:03:59.040 How do bank managed funds compare to non bank funds 0:03:59.080 --> 0:04:02.320 in terms of those investments in these high alert countries. 0:04:03.360 --> 0:04:07.400 The banks are managing by far the majority of kysaber 0:04:07.480 --> 0:04:10.880 and retail investment assets in New Zealand, so I think 0:04:10.920 --> 0:04:14.480 in total they are managing two thirds of all investments 0:04:14.560 --> 0:04:17.719 in New Zealand. And what we found is that they 0:04:17.960 --> 0:04:22.440 are seventy five percent of the investments in the worst 0:04:22.480 --> 0:04:25.159 performing countries are coming from the bank funds, so that's 0:04:25.160 --> 0:04:28.200 slightly the bank funds are slightly more likely to invest 0:04:28.279 --> 0:04:31.400 in the worst performing funds than the non bank funds. 0:04:32.120 --> 0:04:35.560 This I should also mention this research was a snapshot 0:04:35.640 --> 0:04:38.680 in time as of March twenty twenty four, and there 0:04:38.720 --> 0:04:41.360 have been changes since and so when we're talking about 0:04:41.400 --> 0:04:45.559 bank funds, we included ben Z funds at that date, 0:04:45.720 --> 0:04:49.680 but since since then Benz has sold those assets to 0:04:49.839 --> 0:04:53.800 Harbor Asset Management, so we would get slightly different results now. 0:04:53.839 --> 0:04:57.000 And so can people check what their can we savor 0:04:57.160 --> 0:04:58.240 is going towards? 0:04:59.440 --> 0:05:02.039 In the paper, we do look at what. 0:05:02.720 --> 0:05:06.240 Was the case as of March twenty twenty four, but 0:05:06.279 --> 0:05:08.120 we know that things will have changed since then. The 0:05:08.160 --> 0:05:11.080 main point of this research was not to provide up 0:05:11.120 --> 0:05:15.479 to date detail on individual KVSAP funds. There was more 0:05:15.520 --> 0:05:18.200 to point out the fact that there is no system 0:05:18.279 --> 0:05:22.839 that allows individual people to get that up to date information. 0:05:23.440 --> 0:05:27.560 So we're calling for industry bodies like the Responsible Investment 0:05:27.600 --> 0:05:32.360 Association of Australasia and other organizations like Mindful Money, which 0:05:32.400 --> 0:05:34.200 is a New Zealand charity, to. 0:05:34.279 --> 0:05:35.279 Make it easier. 0:05:35.640 --> 0:05:39.359 They're already kind of offering some certification programs and Mindful 0:05:39.400 --> 0:05:42.080 Money have an excellent website where you can go and 0:05:42.120 --> 0:05:45.599 look at your kiwisaver and see how it's investing in 0:05:45.960 --> 0:05:50.680 companies that are, you know, for example, fossil fuel producers 0:05:50.800 --> 0:05:55.520 or weapons manufacturers. But currently that information is not available 0:05:55.800 --> 0:05:59.360 on which of each kiwisaver funder and to the extent, 0:05:59.480 --> 0:06:02.600 which of it's investing in the best versus the worst countries. 0:06:02.880 --> 0:06:04.960 So yeah, that's kind of the key point really that 0:06:05.000 --> 0:06:07.080 we're trying to draw attention to the fact that this 0:06:07.279 --> 0:06:12.120 missing information. Individuals can contact their key we saver provider 0:06:12.279 --> 0:06:18.080 and ask for information about tell their provider that they 0:06:18.200 --> 0:06:22.960 care about this, and even consider switching providers if their 0:06:23.000 --> 0:06:25.680 current provider is not taking this issue seriously. 0:06:26.240 --> 0:06:29.640 Is there any evidence of I suppose rights washing or 0:06:29.760 --> 0:06:34.480 is even misleading ethical labeling among these retail funds. 0:06:35.920 --> 0:06:40.200 No, I wouldn't say we found any direct evidence of that. 0:06:40.600 --> 0:06:44.479 But what we did find is that the existing certifications 0:06:44.520 --> 0:06:48.880 that are available are not currently set up to evaluate 0:06:49.120 --> 0:06:50.720 this particular asset. 0:06:50.440 --> 0:06:52.040 Class of investments. 0:06:52.640 --> 0:06:54.760 So for example, and you know, and I want to 0:06:54.800 --> 0:06:58.360 emphasize also that this field of responsible investment is very 0:06:58.440 --> 0:07:01.960 much emerging. Ten or twenty years ago, you know, the 0:07:02.000 --> 0:07:04.760 sort of certifications that we have now didn't even exist. 0:07:05.520 --> 0:07:07.279 So I like to think that it's going to continue 0:07:07.279 --> 0:07:09.280 to move in the right direction in the is to come. 0:07:10.120 --> 0:07:14.280 But for example, we found that sixty seven percent of 0:07:14.320 --> 0:07:17.360 the lending to the worst performing countries was coming from 0:07:17.440 --> 0:07:21.280 funds that have a rare certification. So that's some kind 0:07:21.280 --> 0:07:26.160 of responsible investment certification from the Responsible Investment Association Australasia. 0:07:27.520 --> 0:07:30.280 And now that's I wouldn't call that rights washing because 0:07:30.440 --> 0:07:33.400 what RIA say is that they're really just telling you 0:07:34.120 --> 0:07:38.360 whether what the fund is claiming is actually true to label. 0:07:39.040 --> 0:07:41.600 And generally what they're doing is they might be telling 0:07:41.640 --> 0:07:45.560 you that a fund's climate related claims, for example, are valid. 0:07:45.960 --> 0:07:49.280 It's just not telling you anything at all about how 0:07:49.360 --> 0:07:52.080 much of the fund might be being lent to governments 0:07:52.320 --> 0:07:55.440 with very poor human rights record. 0:08:01.960 --> 0:08:04.440 The typical thing for funds is that they want to 0:08:04.480 --> 0:08:07.520 make money, so they tend to chase short term returns, 0:08:07.920 --> 0:08:10.800 and often those short term returns are in companies that 0:08:10.920 --> 0:08:14.560 do things that are pretty terrible. And we survey the 0:08:14.560 --> 0:08:17.240 public each year to find out what people want to avoid, 0:08:17.800 --> 0:08:20.360 and they want to avoid things like weapons, but also 0:08:20.440 --> 0:08:25.360 human rights violations, animal cruelty, fossil fuels, and social harm 0:08:25.560 --> 0:08:27.640 like tobacco and gambling. 0:08:27.520 --> 0:08:27.960 And so on. 0:08:30.200 --> 0:08:32.800 So what needs to be done? What are the next steps? 0:08:32.840 --> 0:08:36.120 Because the public has changed the tide, so to speak. 0:08:36.200 --> 0:08:40.439 Before you mentioned the weapons manufacturing, everyone was up in 0:08:40.559 --> 0:08:44.160 arms about their can we saver retirement investments going into 0:08:44.200 --> 0:08:45.640 things like weapons or. 0:08:45.679 --> 0:08:51.640 Drugs or war in general? So we've done it before, 0:08:51.720 --> 0:08:52.720 how can we do it again? 0:08:53.200 --> 0:08:53.400 Yeah? 0:08:53.559 --> 0:08:56.800 Absolutely. Each individual has quite a lot of power in 0:08:56.880 --> 0:09:00.200 terms of where they direct their chemisab balances, and even 0:09:00.240 --> 0:09:03.480 if their balances are relatively small, if they talk to 0:09:03.679 --> 0:09:06.240 their friends and family about it, it can really. 0:09:06.000 --> 0:09:07.640 Add up to quite a growing movement. 0:09:07.679 --> 0:09:12.160 And it's definitely that desire by individual kiwis to be 0:09:12.320 --> 0:09:15.200 investing more responsibly. That has led to a lot of 0:09:15.200 --> 0:09:19.280 these shifts we've already seen, so in terms of I mean, 0:09:19.320 --> 0:09:21.640 I would say there's just tons of opportunities here. 0:09:22.440 --> 0:09:24.199 And when we looked at the best. 0:09:23.920 --> 0:09:27.079 Performing countries, so we looked at which funds are invested 0:09:27.280 --> 0:09:29.520 only in the best performing countries. 0:09:30.040 --> 0:09:32.680 And you know, there are thirty five. 0:09:32.520 --> 0:09:34.600 Countries in the world that are in that kind of 0:09:34.640 --> 0:09:37.640 best performing category, and thirty one of them have really 0:09:38.679 --> 0:09:42.440 significant and liquid bond markets, so they're very investable. But 0:09:42.520 --> 0:09:44.839 what we found is that there's not very not very 0:09:44.880 --> 0:09:49.680 many funds out are investing exclusively in a diversified range 0:09:49.720 --> 0:09:51.400 of those best performing countries. 0:09:51.880 --> 0:09:54.160 So for the funds themselves. 0:09:53.559 --> 0:09:55.920 I would say there's a huge opportunity for them to 0:09:56.000 --> 0:10:00.839 offer more access to investments in those best performing countries. 0:10:02.080 --> 0:10:05.640 For industry bodies, I think there's a huge opportunity to 0:10:05.760 --> 0:10:10.720 set up systems to consider human rights more consistently when 0:10:10.720 --> 0:10:13.760 it comes to investing in government bonds. And then for 0:10:13.920 --> 0:10:17.079 individual people themselves, you know, the opportunity is to tell 0:10:17.120 --> 0:10:21.320 their provider that they care and consider switching if their 0:10:21.440 --> 0:10:24.040 provider doesn't care, and if they do, does. 0:10:23.880 --> 0:10:26.440 Something like that need government intervention. 0:10:27.080 --> 0:10:32.040 So New Zealand has good disclosure regulation, so funds are 0:10:32.080 --> 0:10:36.000 required to disclose exactly which assets are invested in, and 0:10:36.040 --> 0:10:38.800 it was because of that regulatory framework that we were 0:10:38.840 --> 0:10:41.599 able to do this research, which I would say is 0:10:41.679 --> 0:10:45.560 quite groundbreaking globally because most other countries don't have a 0:10:45.640 --> 0:10:48.880 data set that would allow this type of research to 0:10:48.920 --> 0:10:51.920 be done. But yet there is more that can be 0:10:51.960 --> 0:10:55.640 done in the sense that often what the responsible investment 0:10:55.760 --> 0:11:00.480 certifications focus on are the things that funds are required 0:11:00.679 --> 0:11:04.719 to do by under regulation. And so now there are 0:11:04.760 --> 0:11:09.240 increasing climate related disclosures and so that has led the 0:11:09.280 --> 0:11:12.839 certification programs to focus on more climate related stuff. So 0:11:12.960 --> 0:11:17.000 it is more regulation would be helpful, but I don't 0:11:17.040 --> 0:11:18.040 think it's necessary. 0:11:18.760 --> 0:11:21.240 So just to be clear, if I called up my 0:11:21.600 --> 0:11:25.480 provider and said I want information about how my money 0:11:25.559 --> 0:11:27.040 is being spent, how. 0:11:26.840 --> 0:11:29.480 Easy or difficult is it for me to get that information? 0:11:30.280 --> 0:11:33.079 It probably varies from provider to provider. 0:11:34.360 --> 0:11:39.920 Right now, there's an excellent website that Mindful Money Operate, 0:11:40.040 --> 0:11:42.079 where you can put in the name of your kivsaver 0:11:42.240 --> 0:11:45.800 and get all that information in terms of the company 0:11:45.960 --> 0:11:48.240 shares that your kevsaver invested in. 0:11:48.679 --> 0:11:50.480 It just hasn't yet been. 0:11:50.360 --> 0:11:55.200 Expanded to also include information on the government bonds that 0:11:55.240 --> 0:11:58.680 your key resaver is published in. So there's already platforms 0:11:58.720 --> 0:12:01.960 that exist that could give you that answer, you know, 0:12:02.120 --> 0:12:04.760 really easily without you even need are in needing to 0:12:04.800 --> 0:12:11.320 call your provider, but they haven't yet included this segment 0:12:11.520 --> 0:12:13.840 of the market, and so in the meantime you would 0:12:13.880 --> 0:12:15.640 need to call your provider and. 0:12:15.600 --> 0:12:18.040 Ask they should be able to answer your questions. 0:12:19.000 --> 0:12:22.080 So did you that for you as researchers? 0:12:22.120 --> 0:12:25.320 Did you have to ask individual each individual provider for 0:12:25.360 --> 0:12:27.640 that information for that snapshot in time? 0:12:28.280 --> 0:12:31.520 No, we got the data from all funds are required 0:12:31.559 --> 0:12:37.720 to disclose their asset holdings in the disclosed Register of 0:12:37.800 --> 0:12:41.920 the company's office, and that information is disclosed I think 0:12:42.080 --> 0:12:43.080 every six months. 0:12:43.080 --> 0:12:44.120 I might have that wrong. 0:12:44.880 --> 0:12:47.679 That's a data set that can be downloaded, but it's 0:12:47.720 --> 0:12:50.520 not very accessible to the individual person. So no, we 0:12:50.600 --> 0:12:54.439 didn't need And there's I think seven hundred and something 0:12:55.080 --> 0:12:57.880 kisov and retail investment funds that were included in that 0:12:58.000 --> 0:12:58.560 data set. 0:12:58.920 --> 0:13:01.840 How aware do you do you think New Zealanders are 0:13:02.080 --> 0:13:05.920 generally about the human rights profile of their investments. 0:13:05.960 --> 0:13:08.560 Do you think that they'll see this and be quite shocked? 0:13:09.000 --> 0:13:11.800 Some of them probably will be. It's probably something that 0:13:11.960 --> 0:13:14.640 a lot of people just haven't thought about before. We 0:13:14.760 --> 0:13:18.800 do know from surveys of New Zealanders that human rights 0:13:18.920 --> 0:13:22.360 is something that they care about in their investments, but 0:13:22.440 --> 0:13:26.800 I think people often their attention falls on the human 0:13:26.880 --> 0:13:30.600 rights practices of companies whose shares they own, So you know, 0:13:30.840 --> 0:13:34.400 is this company complicit in any kind of major human 0:13:34.480 --> 0:13:38.719 rights violations in terms of their business operations, And there's 0:13:38.800 --> 0:13:43.920 much less attention being given to the investments, what investments 0:13:43.920 --> 0:13:48.120 are supporting in terms of loans to government through purchases 0:13:48.120 --> 0:13:50.480 of selfign bonds. So yeah, I think it's probably just 0:13:50.520 --> 0:13:52.760 something that hasn't been on the horizon. 0:13:53.120 --> 0:13:57.200 And you mentioned that it's significantly easier here to get 0:13:57.200 --> 0:14:00.280 this information rather than the country's of a sentase. 0:14:00.760 --> 0:14:02.359 Do you think that this research. 0:14:02.040 --> 0:14:06.480 Will contribute to a global discussion about how ethical investments work. 0:14:07.000 --> 0:14:07.240 Yeah? 0:14:07.280 --> 0:14:11.079 Absolutely, this is groundbreaking research, not just for New Zealand 0:14:11.160 --> 0:14:16.200 but globally, because the sovereign bond asset class is being 0:14:16.280 --> 0:14:21.480 systematically ignored globally by responsible and ethical investing. 0:14:21.560 --> 0:14:22.239 Not completely. 0:14:22.320 --> 0:14:26.520 There are like individual ethical funds that take it very seriously, 0:14:27.000 --> 0:14:32.240 but the majority of the investment market is largely ignoring 0:14:32.280 --> 0:14:32.960 this issue. 0:14:33.120 --> 0:14:36.760 Do you think it's well, we're moving in a positive direction. 0:14:37.160 --> 0:14:40.160 I suppose when it comes to ethical investments, because it 0:14:40.200 --> 0:14:42.000 was not that long ago when we were talking about 0:14:42.040 --> 0:14:43.200 weapons manufacturing. 0:14:43.880 --> 0:14:46.800 Look, it's an evolving field, and I would say over 0:14:46.840 --> 0:14:49.280 the past couple of decades it has very much been 0:14:49.360 --> 0:14:51.760 moving in a positive direction and I see no reason 0:14:52.280 --> 0:14:53.400 why that won't continued. 0:14:53.600 --> 0:14:55.479 Thanks for joining us, Ann Marie. 0:14:55.200 --> 0:14:57.080 Thanks so much for having me pleasure. 0:15:00.160 --> 0:15:03.360 That's it for this episode of the Front Page. You 0:15:03.400 --> 0:15:07.280 can read more about today's stories and extensive news coverage 0:15:07.320 --> 0:15:11.400 at enzidherld dot co dot nz. The Front Page is 0:15:11.480 --> 0:15:14.880 produced by Jane Ye and Richard Martin, who is also 0:15:15.080 --> 0:15:15.720 our editor. 0:15:16.240 --> 0:15:17.680 I'm Chelsea Daniels. 0:15:18.120 --> 0:15:21.320 Subscribe to The Front Page on iHeartRadio or wherever you 0:15:21.360 --> 0:15:25.040 get your podcasts, and tune in tomorrow for another look 0:15:25.120 --> 0:15:26.280 behind the headlines.