It’s worth finding out if your savings are being invested in the right way, says one local provider.
This is an excerpt from our weekly business newsletter Stocktake.
“Yes, yes!” shouts John Berry down the phone. He sounds like he’s just closed a major deal and is pumping his fist in the air, Gordon Gekko style. It’s nothing like that: I’ve just told him I invest most of my kids’ Sharesies money – a grand total of $5 a week – into something called the “Global Water Fund”. Berry started the fund, which invests solely in companies helping solve the worldwide water crisis, in 2010, and it’s still going strong. “It’s awesome your kids are in there,” he says, delighted.
Back then, starting a fund dedicated to doing good things for the planet was a tough sell. “When we talked about the water crisis, water distribution, water purity, access to water … people thought we were a bit bonkers,” says Berry. With no Sharesies around back then, he was reliant on financial advisers to help sell his fund’s ambitions to investors. They weren’t keen. “They’d say, ‘I’ve got one nutcase greenie client … I’m not going to show it to anyone because it’s just so out there.’”
Berry got a similar reaction when he and co-founder Paul Brownsey launched Pathfinder’s KiwiSaver fund in 2019. Like Global Water, the idea was to provide a KiwiSaver platform for ethically-minded investors, those concerned about the environment and climate change. That meant investing only in companies doing good things, and banning any businesses profiting from arms manufacturing, animal testing, tobacco, fossil fuels or contributing to climate change.
Once again, Berry faced pushback. “The initial reaction was, ‘You can’t make money and be ethical,’” he says. When Covid-19 hit, and markets plunged around the world, it seemed even more risky. As Brownsey puts it: “Our industry has battled the far-reaching effects of the pandemic, historically low interest rates, the worst six-month period for bonds in history, high inflation and technical recessions in some major economies, just for starters.”
Right now, Berry and Brownsey can afford to laugh at those early doubters. According to Morningstar data released in July, Pathfinder earned its 6,000 investors some of the biggest returns going – more than 11%, with the rest averaging around 5% – over the past three years. It proves their theory, that ethical investing can also make money, has paid off. “Now we have data to validate that you can make money and feel good about making money,” says Berry.
More people are waking up to environmental concerns and how investing can help point the way forward, Berry says. Pathfinder investigates the companies it invests in, and constantly reappraises them. Yes, it’s stopped investing in companies if anything surfaces that comprises those ethical values. “We’re trying to find leaders within their industry or just worldwide leaders that are driving change and are implementing best practice for their business,” says Berry. “I still want to make as much money as I can in a way that not only doesn’t harm the planet but benefits the planet and communities.”
Other KiwiSaver providers may exclude troubling industries, but Berry believes that’s not good enough. “My belief is, if you want to change the world, it will take a long time by avoiding things. It’s a really slow way,” he says. “We look at what the megatrends are that going to shape the world over the next decade and beyond, like renewable energy, energy efficiency and water. We want to over-invest in those things.”
Berry’s not necessarily trying to get people to switch their KiwiSaver providers by speaking out. He’s just trying to raise awareness, and educate those who maybe don’t know exactly where their weekly KiwiSaver payments are going. Many, he says, don’t know how to check their KiwiSaver accounts, and don’t know who they’re with or even how much money they have invested. It’s worth finding out, he says, and once you’ve done that, you can check where that money’s going by using the Mindful Money service, which rates providers’ ethical status.
“A lot of people get a surprise,” says Berry. “There’s more money in there than they think … but it’s a default fund which in the past has been the conservative fund. They’ve sat there for years and years.” I also got a surprise: my fund was investing in companies involved in tobacco and animal testing. I’m correcting that immediately, and Berry says it’s easier than many people think. “You just need your IRD number and your passport. You don’t even need to know who your KiwiSaver’s with,” says Berry. “It is actually unbelievably simple. It’s literally two minutes.”