Green Party co-leader and Climate Change Minister James Shaw said his party won a significant change in the way KiwiSaver funds can invest from June 2021 by securing the exclusion.
"Moving money away from dirty energy is important if we are to create cleaner, greener and safer communities in every part of the country," Shaw said in a statement.
"We need more bold actions like the one we announced today, and we need others that are holding large purse strings to follow KiwiSaver and end their investments in fossil fuels."
The government also today said it will shift the risk settings on default funds to 'balanced' portfolio – typically a mixture of bonds and equities – compared to the 'conservative' setting currently used, that is largely made up of bonds and cash holdings.
"The change is intended to make a real difference to people's financial wellbeing in retirement," Finance Minister Grant Robertson said in a statement.
When seeking feedback on the proposals last year, Commerce Minister Kris Faafoi said the bottom line for KiwiSaver was to ensure all members get good value for money.
He reiterated that today, and said fees will be a key component of the procurement process.
"We're also focusing on ensuring New Zealanders get greater value for money from their fees, which we know can make a big difference in the amount of money people have for their retirement," Faafoi said. "The fees each provider charges will be factored into the providers we select during the procurement process."
Of the country's 3 million KiwiSaver members, about 690,000 are in default funds, with fewer than half of those actively choosing to hold their investments in a low-returning default fund. Around 400,000 are in default funds, literally, by default.
Faafoi said the new contracts will also require providers to do more to engage with their members.
"This will help with things like understanding what fund is best for KiwiSaver members and how much they should be contributing so they are on track for the type of retirement they want," he said.
Other obligations will include ensuring KiwiSaver fees are simple and transparent, requiring default providers to maintain a responsible investment policy that's published on their website, and transferring all non-active default members of any provider that isn't reappointed to one of the appointed default funds.
In the previous re-tendering, Westpac, Bank of New Zealand, KiwiBank and Booster - formerly Grosvenor Financial Services - joined AMP, ANZ Bank New Zealand, ASB Bank, Mercer and Fisher Funds as default providers.
The CareSaver provider is positioning itself as the best ethical option, saying it's the country's only fossil-fuel free provider based on analysis by Mindful Money, a charity that promotes ethical investment.
"We welcome and are pleasantly surprised by this bold move by the government to join us in this position of leadership in New Zealand," said John Berry, chief executive of fund manager Pathfinder and the CareSaver provider.
"We believe it is a smart and forward-looking approach for both investors and the planet."
In last year's discussion document on the proposals, officials warned ministers that excluding certain types of investments would result in higher fees, but could result in higher confidence and trust in the KiwiSaver scheme, which has vastly outperformed the expectations of its architect, Michael Cullen.
New Zealand First had been pushing for the creation of a government-owned and operated KiwiSaver provider.
Deputy leader Fletcher Tabuteau withdrew a private members bill in late 2018 for a working group to consider such a scheme, saying he'd help the ministers do groundwork for the default review and the Retirement Commissioner's review of retirement policies which was canvassing the issues he wanted addressed.
(BusinessDesk)
