KiwiSaver provider Kiwi Wealth says it will cut out investments in weapons, tobacco and whaling companies as part of a new responsible investment strategy as well as companies with a poor track record in environmental, social and governance areas.

The move comes a year after Radio NZ and the Herald highlighted controversial investments made by KiwiSaver providers.

That resulted in a public backlash from consumers which has seen providers move out of the investments.

Kiwi Wealth, a sister company to Kiwibank, said it had designed a new fund built and directed by its in-house investment team.

Advertisement

The enhanced index fund will initially exclude the same companies listed by the New Zealand Superannuation fund on its exclusion lists.

But it will also take it a step further by excluding those with poor ESG track records.

Simon O'Grady, chief investment officer at Kiwi Wealth, said the fund would remain low cost but keeping it in house meant the company could change it over time.

"Our new fund has been built from the ground up by our investment management team and is tailored for the New Zealand market, with an expectation that the enhanced tracker will outperform passive index funds used by other KiwiSaver providers."

O'Grady said it would also incorporate responsible investing "throughout our process".

"Responsible investing involves identifying companies that are being irresponsible in the environmental, social and governance areas, and excluding them because poor behaviour in these areas tends to correlate with poor returns."

He said the change reflected Kiwis' growing sophistication and financial awareness when it comes to investing.

"They recognise that there's a duty to match investors' ethical and social concerns with good investment returns."