Ethical investing — also called ESG (Environmental, Social, Governance) investing — lets you align your portfolio with your values. In New Zealand, several platforms offer ESG-screened or socially responsible investment options.
ESG options available to NZ investors include Kernel Global ESG Fund (0.25%, tracks the S&P World PAB ESG index), Simplicity's standard funds (0.23%, exclusions built in), and the InvestNow Foundation Series Global ESG Fund (0.10%, plus a 0.50% buy/sell fee). All major NZ managed funds exclude some controversial sectors. There's no perfect ethical fund: exclusions vary significantly, so check what each fund actually screens out.
What Does ESG/Ethical Investing Mean?
ESG investing uses criteria beyond financial returns to select investments:
- Environmental (E): Carbon emissions, climate risk, resource use, pollution
- Social (S): Labour standards, human rights, community impact, data privacy
- Governance (G): Board diversity, executive pay, anti-corruption, transparency
Common exclusions in NZ ESG funds:
- Fossil fuel companies (coal, oil, gas extraction)
- Weapons manufacturers (especially controversial weapons — cluster bombs, landmines, nuclear)
- Tobacco producers
- Gambling companies
- Adult entertainment
NZ ESG Fund Options
Providers are listed alphabetically.
InvestNow: Foundation Series Global ESG Fund
- Fee: 0.10% p.a., plus a 0.50% buy and 0.50% sell fee (as at October 2026)
- What it holds: Global shares through two Vanguard ETFs, the Vanguard ESG U.S. Stock ETF (ESGV) and Vanguard ESG International Stock ETF (VSGX)
- Benchmark: 67% FTSE USA All Cap Choice Index and 33% FTSE Global All Cap ex USA Choice Index; the fund seeks to limit exposure to companies involved in particular business practices
- Note: Check the fund’s PDS for the full exclusion list
Kernel Global ESG Fund
- Fee: 0.25% p.a.
- Index: S&P World PAB (Paris-Aligned Benchmark) ESG Ex-Non-Pharma Animal Testing Index
- What it holds: A global equity portfolio re-weighted toward companies with higher ESG scores and Paris Agreement/net-zero alignment (does not fully exclude entire sectors; a best-in-class/re-weighting approach)
- Exclusions: Controversial weapons, tobacco, gambling, and thermal coal
- Note: This is a re-weighted, benchmark-relative approach, so some companies in carbon-intensive sectors with transition plans may still be included
Simplicity Growth/Balanced/Conservative Funds (Built-in Exclusions)
- Fee: 0.23% p.a. (from 1 October 2026)
- Exclusions: Fossil fuel extraction, tobacco, weapons (controversial), gambling, adult entertainment
- Approach: Exclusion-based (removes excluded sectors rather than best-in-class selection)
- Note: Simplicity’s funds are not marketed primarily as ESG funds but have exclusions built in.
Smart ESG ETFs
- Smart Global ESG ETF (ESG): Tracks global equities screened for ESG criteria
- Fee: 0.54% p.a.
- Available via: Sharesies, Tiger Brokers, direct Smart account
Best-in-Class vs Exclusion-Based ESG
Two main approaches:
Exclusion-based: Removes companies in specific industries entirely.
- Example: No oil companies regardless of their environmental practices
- More intuitive — you know it excludes sector X
- May exclude large index components, causing tracking error
Best-in-class: Selects companies with the best ESG scores within each sector.
- Example: The “best” oil company by ESG standards is included; the “worst” is not
- More diversified — no sector is fully excluded
- Controversial to some ethically-minded investors (you still own some oil companies)
Kernel’s fund uses best-in-class. Simplicity uses exclusion-based. Neither approach is objectively right — depends on your values.
ESG Performance: Does It Cost Returns?
This is the most-asked question. Short answer: not significantly over the long run, but there are periods of underperformance.
When ESG underperforms:
- Energy sector bull markets (e.g., 2021–2022 when oil prices surged)
- ESG funds miss gains in excluded sectors
When ESG outperforms or matches:
- Extended periods of tech dominance (tech tends to score well on ESG)
- Governance scandals punish companies ESG screens would have excluded
Long-run data is limited (ESG funds are relatively new). Most academic studies find ESG vs standard index returns are broadly similar over 10+ year periods, with ESG having higher volatility in some periods.
What Most NZ Funds Already Exclude
Even without choosing a specific ESG fund, most mainstream NZ funds have some exclusions. For example:
| Provider | Built-in exclusions |
|---|---|
| InvestNow Foundation Series | Some: check each fund’s PDS |
| Kernel (standard funds) | Controversial weapons only |
| Simplicity | Fossil fuels, tobacco, weapons, gambling, adult |
| Smart (standard) | Controversial weapons (passive, minimal exclusions) |
| KiwiSaver funds (most) | Controversial weapons (legally required) |
NZ KiwiSaver providers are legally prohibited from investing in manufacturers of cluster munitions, anti-personnel mines, biological/chemical weapons, and nuclear weapons. This baseline applies to all KiwiSaver funds.
Greenwashing — What to Watch For
Not all “ESG” or “sustainable” labels are equal. To evaluate a fund:
- Read the Product Disclosure Statement (PDS): What specifically is excluded?
- Check the responsible investment policy: Is it on their website and detailed?
- Look at the actual holdings: Does the fund publish holdings? Any surprises?
- Who certifies it? Mindful Money (mindful.money) provides NZ fund analysis and ESG ratings
The Responsible Investment Association of Australasia (RIAA) certifies funds to specific standards. A RIAA-certified fund has met a defined responsible investment standard.
Platforms for Ethical Investing in NZ
Platforms are listed alphabetically.
| Platform | ESG options | Notes |
|---|---|---|
| InvestNow | Foundation Series Global ESG Fund | Access via InvestNow account |
| Kernel | Sustainable Global Fund | Dedicated ESG fund, best-in-class approach |
| Sharesies | Smart Global ESG ETF (ESG) | Can also exclude individual companies |
| Simplicity | Standard funds with exclusions | 0.23% fee, not marketed as ESG |
Mindful Money is not a platform but a fund comparison site that shows the holdings and ESG screening of NZ funds.
NZ Investor Considerations for ESG
PIR rate advantage still applies: ESG-structured PIE funds in NZ are still taxed at your PIR rate (max 28%) — the same tax advantage as non-ESG PIE funds.
KiwiSaver ESG options:
- Booster Socially Responsible Investment (SRI) fund
- Generate KiwiSaver (ethical option available)
- Kernel KiwiSaver (ESG fund available)
- Simplicity KiwiSaver (exclusions built in, 0.23% fee)
Where to check the latest data
Rates, fees and returns change often. Before deciding, check current figures yourself:
- Sorted Smart Investor: compares fees, returns and risk levels of KiwiSaver and managed funds.
- Disclose register: holds each fund's product disclosure statement and quarterly fund updates.
- Financial Service Providers Register: shows whether a provider is registered to offer financial services in New Zealand.
- The provider's own website: has its current rates, fees and full terms; these change more often than any comparison page.