New Kiwisaver rules will ban ‘investing in fossil fuels’

The Government plans to impose new rules on Kiwisaver.

One makes sense – changing default Kiwisaver schemes from conservative to balanced. Most people starting on Kiwisaver will have a long time until retirement, and should be at least in balanced funds if not in growth funds until they get closer to retirement (except perhaps for now when the share market is tanking). People are still free to choose what scheme they are on.

One seems a waste of time – banning Kiwisaver investments in “companies making land mines, cluster bombs, and other illegal weapons”. I hope that will affect just about no Kiwisaver schemes, although it can get complicated where large companies do many things, and have a lot more suppliers and contractors.

One may be more controversial – banning Kiwisaver investments in ‘fossil fuels’.

RNZ: New KiwiSaver rules to ban investing in fossil fuels and illegal weapons

Commerce Minister Kris Faafoi said banning investment in fossil fuel companies would help combat climate change and carbon emissions.

“It also makes sense for the funds themselves given that there is a risk of investing in stranded assets as the world moves to reduce emissions.”

He said the Superannuation Fund quit such investments more than two years ago and its investment returns had not suffered.

‘Not suffered’ on it’s own is meaningless.

It may be interesting to see what the rules actually define for ‘fossil fuel companies’. Exploration and drilling and mining should be clear, but what about distribution and sales? Airlines, shipping and transport companies that use a lot of fuel? Car manufacturers?


UPDATE – the Beehive has released clarification and more details. The ban on investing in fossil fuels only applies to default funds, so it’s more gesture than a comprehensive government interference in what you can invest your own money in.

Default KiwiSaver changes support more responsible investment

New Zealanders’ savings in KiwiSaver default funds will soon exclude investment in fossil fuels, the Ministers of Finance and Commerce and Consumer Affairs announced today.

Rule changes mean that investments in fossil fuel production will be excluded from future funds that are default providers.

Default providers are funds that are allocated to people who do not actively choose a fund when they join KiwiSaver.

“This reflects the Government’s commitment to addressing the impacts of climate change and transitioning to a low-emissions economy,” Commerce and Consumer Affairs Minister Kris Faafoi said.

“It also makes sense for the funds themselves given that there is a risk of investing in stranded assets as the world moves to reduce emissions.

“In 2017, the $47 billion NZ Superannuation Fund adopted a climate change investment strategy that resulted in it removing more than $3 billion worth of stocks that exceed thresholds for either emissions intensity or fossil fuel reserves, without negatively affecting performance. So we know that moving away from investments in fossil fuels doesn’t have to mean lower returns.”

Climate Change Minister James Shaw said rules set down by previous governments have allowed New Zealanders’ hard-earned money to be used to support the fossil fuels companies that are the leading cause of the climate crisis.

“No New Zealander should have to worry about whether their retirement savings are causing the climate crisis. That’s why our Government is moving default KiwiSaver funds away from fossil fuels, putting people and the planet first,” James Shaw said.

Finance Minister Grant Robertson said the Government wanted to ensure people who remained in default funds got the maximum benefit from their investments.

The terms of the existing nine default providers expire in June 2021.

“As we go about appointing new providers, the Government is also improving the settings for investors,” Grant Robertson said.

“We’re changing default fund settings from ‘conservative’ to a ‘balanced’ fund. The change is intended to make a real difference to people’s financial wellbeing in retirement,” Mr Robertson said.

“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. So the fees each provider charges will be factored into the providers we select during the procurement process,” Mr Robertson said.

Kris Faafoi said another key area of focus would be to ensure members have all the information they need to make good decisions about their fund.

“We want all New Zealanders to enjoy the benefits of KiwiSaver. No fund will be right for everyone so we’re requiring default providers to do more to engage with their members and help them make the right decision for their circumstances. 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”, Mr Faafoi said.

About 690,000 New Zealanders have stayed in default KiwiSaver funds, which they were automatically enrolled in when they started a new job. Approximately 400,000 of those have not made an active choice to stay there.

Notes:

Improvements the Government is making include:

  • changing the investment mandate from ‘conservative’ to a ‘balanced’ fund
  • ensuring KiwiSaver fees are simple and transparent, and using the procurement process to put pressure on fees
  • obligations on default providers to engage with their members to help them make informed decisions about their retirement savings
  • excluding investments in fossil fuels and illegal weapons. While default fund providers have in recent years divested any investments in companies involved in illegal weapons like cluster munitions and anti-personnel landmines, the changes now enshrine that requirement in default fund settings
  • requiring default providers to maintain a responsible investment policy that’s published on their website
  • transferring non-active default members[1] of any provider that is not reappointed to one of the appointed default providers[2] (so that these members retain the benefits of being in a default fund).

KiwiSaver default fund providers

When people enrol in KiwiSaver but don’t actively choose an investment fund, the Government allocates them a default fund. Around 690,000 people remain in a default fund, and approximately 400,000 of those have not made an active choice to stay there.The terms and conditions that apply to a default provider’s appointment are contained in an instrument of appointment, which is agreed to prior to the term of appointment. There are currently nine default fund providers, and their terms expire in mid-2021.

Every seven years, the Government reviews the settings for default providers ahead of appointing a new selection of default providers through a competitive tender process. The new settings will apply to the default funds that are in place from mid-2021. The procurement process to appoint the new default KiwiSaver providers commences later this year.

Leave a comment

32 Comments

  1. David

     /  1st March 2020

    As per its not how effective a fossil fuel ban is its about the optics with this government.
    I guess the 1st boyfriend will now row to his favorite fishing grounds.

    Reply
    • Blazer

       /  1st March 2020

      could always….sail.

      Reply
    • Kitty Catkin

       /  1st March 2020

      Unless he has a wooden boat made from sustainable trees and not one made of modern materials, he might as well go the whole hog and use fuel. He might, of course, have an electric one with a long lead.

      I hope that he doesn’t use fibreglass and nylon in his fishing boat.

      Reply
      • Kitty Catkin

         /  1st March 2020

        …and that his boring programme won’t be filmed with cameras made of fossil fuels and broadcast on televisions made of them….and that the fish aren’t kept in plastic and polystyrene containers….

        Reply
  2. Corky

     /  1st March 2020

    ”Commerce Minister Kris Faafoi said banning investment in fossil fuel companies would help combat climate change and carbon emissions.’

    That is just plain dumb. He is banning investing in reality, in favour of idealism and quack science.🤔

    Reply
    • Blazer

       /  1st March 2020

      you can still invest yourself….

      Reply
      • Corky

         /  1st March 2020

        I can, and do. But I don’t have the responsibility of carrying the future finances for millions of Kiwis.

        Reply
  3. artcroft

     /  1st March 2020

    Sadly Kiwisaver is now a political football whose job is no longer to provide a retirement income for kiwis, but to be a bargaining chip in coalition negotiations. Next dairying will be banned, then demands will be made that kiwisaver companies hold funds in ‘strategic green ‘ industries. It all equates to lower returns and a poorer outcome for future retirees.
    Labour just loathe the idea of a middle class.

    Reply
    • Corky

       /  1st March 2020

      Arty, years ago a kind lady at ANZ tried to get me signed up to Kiwi saver. I told her it would only become a political football down stream. She laughed… shook her head with a knowing
      smirk and said…’that can’t happen.’ Other tellers joined in with patronising smiles. They must have found my naivety..maybe conspiracy theory infested mind…quaint.

      Of course later on, it came to light, all these tellers were on commission and being forced to sell financial products. So much for their morality.

      Reply
      • Kitty Catkin

         /  1st March 2020

        KiwiSaver is surely not a financial product; that was things like Super Schemes. The bonuses were scrapped. Look up ANZ and teller commissions.

        Reply
        • oldlaker

           /  1st March 2020

          Kitty, ANZ runs its own KiwiSaver scheme (like the other banks) so whether or not they get specific bonuses for persuading customers to sign up, they are under pressure to push people into it.

          Reply
          • Kitty Catkin

             /  1st March 2020

            The bonuses for selling financial products were not being done when KiwiSaver began, from the sound of it, and they have stopped now. But I suspect that it wasn’t seen as one in the way that a Super or insurance was and that even when the individual bonuses were in, KiwiSaver wouldn’t have earned the teller anything. It’s not mentioned in the things that did.

            I am with ANZ and have never been pressured to join KS.

            Corky tends to, well, let’s say exaggerate to prove a point.

            Reply
          • Corky

             /  1st March 2020

            ”The bonuses for selling financial products were not being done when KiwiSaver began.”

            That is a blatant bs. I know because staff tried to force it on me.

            1 July 2007
            When did KiwiSaver start? Officially, KiwiSaver was passed into law in August 2006. The scheme then became active in 1 July 2007. Just five weeks after KiwiSaver’s launch, 92,000 New Zealanders had enrolled with IRD to join .

            https://www.stuff.co.nz/business/106103426/anz-removes-sales-incentives

            I doubt Kitty belongs to ANZ.

            Reply
        • Corky

           /  1st March 2020

          ”Arty, years ago a kind lady at ANZ tried…. ”

          Reply
          • Kitty Catkin

             /  1st March 2020

            Not that kind if, as you claim, she was in it for a commission, and kind people don’t ‘smirk knowingly’.

            Reply
          • Corky

             /  1st March 2020

            ”Of course later on, it came to light, all these tellers were on commission and being forced to sell financial products. So much for their morality.”

            Let’s hope Joe Parker doesn’t take as much punishment as I’m giving out. Fight apparently starts a 2pm.

            Reply
  4. david in aus

     /  1st March 2020

    This is stupid. They should allow self-managed Kiwisaver if these kinds of rules pass.

    It is against my beliefs. Petrochemicals are essential for pharmaceutical and fertilizers. If there were to be no fossil fuel extraction worldwide within a few years, there will be escalating rates of poverty and death.

    Renewable energy technology is already here. The missing link is energy storage. That is where efforts and money needs to concentrated. Cheap enough energy storage for developing countries to afford. Otherwise, there will be no effect on worldwide fossil fuel consumption for electricity and transport, just displacement activity.

    Reply
    • I forgot about plastics.

      What if some great new energy saving technology relies on plastic components that come from fossils?

      Reply
      • david in aus

         /  1st March 2020

        People do not know how much of their household items are dependent on the petrochemical industry including plastics. The list includes pens, clothes, food (transport, fertilizers, pesticides), houses (electric cables), TV, and the laptop I am using.

        These policies are made from ignorance or in the knowledge that it will make no difference to the world’s situation. The toolkit of the politician, meaningless political posturing.

        Reply
        • Kitty Catkin

           /  1st March 2020

          …the glasses I am wearing at my plastic computer….the phone near me…my asthma inhaler…the remote controls….the blades and other parts of the fans….

          A man I know was astonished to be told that he could have carpet made of recycled plastic, and very good carpet it is, too.

          Reply
      • Duker

         /  1st March 2020

        In Europe the most common source of farm fertiliser now is natural gas being used to make ammonia based compounds. Fossil fuel right there.
        And natural gas doesnt just arrive at the door, its oil companies who explore for and develop the fossil fuels and then pipe them to customers or its piped 1000’s km from parts of Siberia.
        If people dont want to USE fossil fuels thats there choice right there ….. walk or ride using wooden clogs or bamboo bikes ….. yeah righ

        Reply
        • Kitty Catkin

           /  2nd March 2020

          I have seen bikes made of bamboo; the frame doesn’t need to be metal.

          But don’t bikes need oil ? And the metal parts have to be mined.

          Wooden clogs need to be made weatherproof….guess what with ?

          Reply
  5. Warren Garlick

     /  1st March 2020

    What about mining fossil fuel for road building or are we going to ride our bikes and drive our electric cars on metal or dirt roads roads. Just watch our economy go down the plug hole.

    Reply
    • Kitty Catkin

       /  1st March 2020

      What cars ? They are also largely made with fossil fuels…we could all have Flintstone cars, I suppose.

      Reply
  6. Reply
    • Kitty Catkin

       /  1st March 2020

      Photo of a child holding a plastic watering can, taken with a plastic camera, downloaded onto a plastic computer….

      Consistency, thou art a jewel.

      Reply
      • Duker

         /  1st March 2020

        Look at all those nice patio concrete pavers….. massive emitters of CO2 right there for cement and concrete production

        Reply
        • Kitty Catkin

           /  2nd March 2020

          And the hose & fittings, of course.

          The pavers might be made of rammed earth. But they might not be !

          Reply
  7. David

     /  1st March 2020

    We have ethical kiwisaver schemes already if that is your thing, no need for the state to get involved.
    Still I am glad this government doesnt busy itself with anything meaningful given their high incompetence level, leave it to banning small things for a headline or announcing oodles of cash for a new project every Sunday and never delivering it so they get to re announce the same thing in a sort of virtuous recycling scheme.

    Reply
  8. Reply
  9. I have updated the post as the Beehive has now published details which clarify some things. The ban on investing in fossil fuels applies to default accounts only, so you can still choose to invest in other schemes that may invest in fossil fuels.

    But the problem remains that the government is dictating some terms of Kiwisaver investment to support other policies. This could be a dangerous precedent.

    Reply
    • David

       /  1st March 2020

      They have form with hitting fossil fuels without having a single though to the consequences. Arderns first outing will actually increase carbon emissions and her 2nd one is the first step on a slippery slope of arguably one of the dumbest financial guys in the country is now making investment decisions concerning totally legal product used by literally every person in the country on a daily basis.
      Its bloody stupid and he should be called out for once again playing politics with peoples pensions, National were when they tinkered with Kiwisaver why is this numpty getting a pass.

      Reply

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