KiwiSaver provider owned by New Zealand Stock Exchange outed as biggest nuclear investor

KiwiSaver funds still have $52 million invested in companies involved in nuclear weapons. Photo / File

A KiwiSaver scheme run by the New Zealand stock exchange has the highest amount of money invested in companies involved in nuclear weapons across the KiwiSaver market.

Research by ethical investment platform Mindful Money found KiwiSaver schemes had a total of $52 million invested in nuclear weapon makers, out of around $71 billion invested as of the end of September.

Barry Coates, founder and chief executive of Mindful Money, said by far the biggest investor was SuperLife which invests in the Smartshares funds which had $5.6 million - 11 per cent of the total.

SuperLife and Smartshares are both businesses owned and run by the New Zealand Stock Exchange.

Coates said the NZX had taken a number of initiatives to recognise the growing importance of ethical investment, including highlighting green bond offerings and joining the network of Sustainable Stock Exchanges.

"Hopefully they will also integrate ethical issues such as excluding investment in nuclear weapons systems into their funds."

Hugh Stevens, chief executive of Smartshares said it was conscious of the increasing demand from investors who want to incorporate ethical, global climate change and sustainability concerns in their investment decisions.

"We have a responsible investment policy, that includes nine central principles for guiding the decisions we make – including governance, independent advice, regular policy reviews and a stated preference for third-party managers who are United Nations Principles for Responsible Investing (UNPRI) signatories."

Stevens said its approach recognised that investors view environmental, social and governance (ESG) factors through multiple lenses which are often shaped by different factors and it needed to offer options that have full market exposure so that investors can manage risk effectively.

"Smartshares' range of investment choices is designed to allow investors to make informed decisions that suit their own unique need and preferences. To achieve this, we offer a range of funds, from fully integrated responsible investment options to full market index tracking options."

Coates said all of the biggest investors in nuclear weapons makers were the index tracking or passive funds.

These funds track a particular index like the S&P/NZX50 and invest in a portion of all of the companies in that index based on how much of the index those companies make up.

They use computer algorithms to invest rather than people picking the individual companies and as a result charge much lower fees.

Coates said until a few years ago people had to choose between a low-cost and ethical option when it came to choosing their KiwiSaver fund, they couldn't have both.

"But now you are have increasingly got passive funds that have really low fees and exclude stuff that the public is worried about. It is quite an important development. That is what has enabled funds like Simplicity and others to establish with not only a low-cost index-based fund but also to have ethical screening as part of it."

Coates said it was surprising that some KiwiSaver funds still invested in nuclear weapons makers given there was a big outcry about it a few years ago.

"There has been recognition that controversial weapons, including nuclear weapons are against New Zealand's values and against New Zealand's policies."

He said some funds were getting around it by defining the delivery systems of nuclear weapons as not part of their exclusion of nuclear weapons.

"So they are saying if it is a missile [maker] that is fine as long as [the company] is not producing the nuclear warhead. But frankly the electronics, the delivery systems and the warheads themselves are so integrally part of the nuclear weapons systems that most agencies do work around the companies involved in this define the nuclear weapons systems rather than just saying well if you are not producing the warhead then it was okay."

"That is what some funds are doing to justify the fact they are investing in nuclear weapons."

Coates said the $52 million figure it came up with included any companies involved in nuclear system delivery, core components, all the items needed to make the missile and operate it.

KiwiSaver members who are worried about having nuclear investments in their portfolio can check for it for free on the Mindful Money website.

"People aren't told what companies their funds invest in and so we think it is good they do so. It is free to members of the public and is really quick and easy to use."

He said people were often shocked when they found these types of investments in their funds.

Barry Coates founder and chief executive of Mindful Money. Photo / Mark Mitchell

Coates said it decided to zero in on nuclear weapons this year after New Zealand signed a treaty for the prohibition of nuclear weapons which came into force on January 22.

"But also nuclear weapons are so much part of New Zealand's ethos and culture that we wanted to have a focus on that as a particularly disturbing investment for many New Zealand investors."

Coates said he hoped the analysis would prompt the funds to review what they were invested in and make changes.

Where they had narrowly defined their investment policy to exclude only nuclear weapons he hoped they would revisit the definitions.