New KiwiSaver Data: Funds Are Divesting From Fossil Fuels, But Not Fast Enough
- KiwiSaver funds have divested from fossil fuel companies in the 6 months to end March 2021 - holdings in oil and gas production companies fell by $331 million
- This reduces the amount invested in fossil fuels by all 321 KiwiSaver funds from $1.85 billion to $1.54 billion
- The proportion of funds invested in fossil fuels has reduced from 2.45% to 1.80%
New data from Mindful Money, an ethical investment charity, shows that KiwiSaver fund holdings in fossil fuel producing companies fell by $331 million in the 6 months to end March 2021, bringing the total amount invested from $1.85 billion to $1.54 billion. This represents a fall in the proportion of total KiwiSaver funds invested from 2.54% to 1.80%
The decrease in fossil fuel investment is a recognition by a growing number of fund providers that they should not be investing in fossil fuel producers. However, this is still ignored by the majority of the industry. $1.5 billion of KiwiSaver funds are still invested in an industry that causes climate chaos and provides returns far below the market average.
Barry Coates explained: “The sharp fall in fossil fuel investment by KiwiSaver funds is good news. However, there are still too many funds investing their clients’ funds into fossil fuel companies. It makes no sense during a climate emergency, but it also makes no sense financially. Some funds have actually increased their investment in fossil fuels when data shows that the US Oil and Gas index has dropped by 74% over the past seven years, compared to a rise in the S&P500 index of over 200%. There have been repeated warnings over stranded assets and other climate risks to fossil fuel companies. Most fund managers have consistently failed to factor the financial risks of climate change into their investment decisions.”
“KiwiSaver investors don’t want to invest in fossil fuels. The latest annual survey shows that three quarters of New Zealanders want to avoid investing in fossil fuel companies The result is that individual investors have not only had their funds invested in the fossil fuel sector against their wishes, but also lost money in doing so. This has not been smart investing.”
This news comes after the latest sobering IPCC report on climate change, showing that effective action is needed if we are to meet our 1.5 degree target. Decreasing investment in fossil fuels is an effective lever for reducing carbon emissions. Analysis by Mindful Money and others shows that reducing the carbon impact of investment is possibly the most significant impact anyone could have in reducing their carbon footprint.
There have been warnings about climate risk and stranded assets (coal, oil and gas reserves that can never be used) since 2015, including from Mark Carney, former Governor of the Bank of England, and other international experts. Most funds ignored those warnings. Only 2% of KiwiSaver funds were divested from fossil fuel companies in 2018.
The good news is that fund managers in New Zealand are waking up. Now 15% of KiwiSaver funds now have a policy to exclude fossil fuels - a listing is included on Mindful Money’s website. Not all of those funds have fully divested - some have yet to fully implement their policies, as shown by the analysis of fossil fuel holdings on Mindful Money’s Fund Checker.
There is another approach to fossil fuel companies. Some fund managers respond that they continue investing in fossil fuel companies because they are engaging those companies and influencing them to transition to renewable energy. However, few provide any evidence of how they are exercising that influence and what changes are being achieved.
The reality is that, with a few exceptions, the major fossil fuel companies have consistently tried to undermine regulation and have made little progress towards the transition to clean energy. According to the leading disclosure organisation, CPD Global, the world’s 24 oil majors spent only 1.3% of their capital expenditure on renewable energy in 2018. Their rhetoric about a climate transition is not matched by their investments.
There are a few fossil fuel companies that are committed to prioritising investment in transitioning away from fossil fuels, and these have been excluded from the Mindful Money analysis. It is time to divest from the others.
Barry Coates commented: “While a growing number of New Zealand fund managers are starting to take climate change seriously, the data shows that most of the investment fund providers are still failing to take the wider impacts of their investments into account. They need to read the science, understand the climate risk, listen to their investors and take action on climate change.”
Barry Coates concluded: “It is easy and free for any member of the public to find KiwiSaver funds that exclude fossil fuels. There is a list of funds at https://mindfulmoney.nz/pages/21/invest-climate-action/”.