The government is seeking feedback from New Zealanders on how Kiwisaver default funds could do better, and they want to know if default funds should be invested responsibly. Around 715,000 New Zealanders still use their default Kiwisaver provider, and together we have the power to ensure that every New Zealander’s default option is fossil free.
Submissions are due Wednesday 18th September at 5pm. Make your own submission to MBIE here
Here’s a summary of our main points:
350 Aotearoa urge the government to change the default KiwiSaver settings and implement a robust criteria for ‘responsible investment’, which utilises negative-screening through sector exclusion policies, in particular, the exclusion of the fossil fuel industry.
- 350 Aotearoa support the adoption of Option 1 and advise that the fossil fuel industry be excluded from default fund portfolios, as investments in the fossil fuel industry pose a material, sociopolitical, reputational, and financial risk to shareholders.
- Material risk: The fossil fuel industry has over five times the amount of coal, oil, and gas than is safe to burn in order to curb temperature rise to 1.5C warming pre-industrial levels. Given the direct link between the fossil fuel industry’s business model and the impacts of climate change, investments in this industry pose a material risk for shareholders.
- Financial risk: Failure to account for falling power prices, the rapid growth of renewable energy, flat or falling energy demand, and new emissions-control policies can result in coal, oil, and gas projects becoming stranded assets. Various fossil fuel products have entered structural decline, which by definition is a long-term shift that transcends cyclical ups and downs. Therefore, it is irresponsible for default KiwiSaver products, which in nature are long-term investments to invest in a high-risk industry, like the fossil fuel industry.
- Reputational risk: The socio-political landscape is rapidly changing as the majority of New Zealanders report being concerned about climate change. There is increased scrutiny on government, investment fund providers, among other institutions to be accountable for their relationship to the fossil fuel industry and the emissions their finance is enabling. Notable social indicators signal the public’s disapproval of the fossil fuel industry that include the divestment movement, which globally has shifted over USD$11 trillion worth of investment portfolios away from the fossil fuel industry, the large mobilisations of students and supporters for School Strike for Climate, and the government’s signal policy to ban new offshore oil and gas permits.
- Behavioral factors impact an individual’s capacity to align their Kiwisaver with their expressed values. It’s clear that consumer preference for responsible investment serves as a good indicator for change. However, consumer choice is confined to structural factors, like a lack of responsibly invested products, and in order to transform the economy sufficiently to meet the needs of New Zealanders, consistent with the impacts of climate change, mandatory exclusion of the fossil fuel industry for default providers is necessary.
- Responsible investment with mandatory exclusion of the fossil fuel industry and a stable economy do not necessarily fall into conflict. Given the rate of climate breakdown and negative feedback loops in the Earth’s cooling systems, the government cannot afford to make compromises for the current economic model. The economy must be shifted and transformed to account for a fast and just transition away from fossil fuels. 350 Aotearoa urge the government to require mandatory exclusion of the fossil fuel industry in default Kiwisaver providers in order to signal this necessary shift.
- 350 Aotearoa also urge the government to adopt a wider certification regime, beyond default providers, to reinstate trust in KiwiSaver members and ensure transparency and accountability of fund providers in adhering to responsible investments.
- We believe the duty to invest responsibly should fall on fund providers rather than Kiwisaver members. Given those fund providers have the economic literacy, access to information, and ultimately the decision-making over investments, there should be stricter policies in place to ensure fund providers are transparent and accountable to the public. For example, Partners for Carbon Accounting Financials have developed a model for the finance sector to accurately report on carbon emissions. This sort of reporting is effective because it holds the finance sector to account for its role in enabling fossil fuel projects to go ahead. 350 Aotearoa believe a reporting model like this would increase transparency and accountability.
Make your own submission to MBIE here