Ethical and socially responsible investing (SRI) has become one of the fastest-growing areas of KiwiSaver in New Zealand. Many providers now offer some form of ethical screening or ESG (Environmental, Social, and Governance) consideration — but the depth and rigour varies enormously.
This page covers what “ethical” can mean, how screening works, what the evidence says on returns, and how to check a fund’s claims.
What Does “Ethical” Mean in KiwiSaver?
“Ethical” is not a regulated term in NZ KiwiSaver. Providers use it loosely — some exclude only the most obvious harmful sectors, others apply rigorous positive and negative screens across their entire portfolio.
Common screening approaches:
| Approach | Description |
|---|---|
| Negative screening | Excludes specific industries (weapons, tobacco, gambling, fossil fuels) |
| Positive screening | Actively selects companies with strong ESG practices |
| ESG integration | Considers ESG factors as part of investment analysis (not purely exclusion-based) |
| Impact investing | Directs capital toward measurable positive outcomes |
| Best-in-class | Invests in the top ESG performers within each sector, including some fossil fuel companies |
The difference matters: a fund that excludes only cluster bombs while still holding oil majors is very different from one that screens out all fossil fuel producers, weapons manufacturers, and companies with poor labour practices.
Which Providers Offer Ethical Funds
Approaches range from short exclusion lists applied to index funds, through dedicated socially responsible fund ranges, to providers that apply negative and positive screens across every fund. How ethical KiwiSaver providers compare sets out each provider’s exclusions, approach and fees.
Performance of Ethical Funds
A concern often raised about ethical investing is that excluding certain sectors (fossil fuels, weapons) limits diversification and therefore returns. The evidence in NZ:
- How ethical growth funds have done against conventional growth funds varies by provider and by the period measured; each fund’s latest fund update shows its own after-fee returns
- The effect of excluding a sector, such as fossil fuels, depends on how that sector performs in the period measured, so it has helped returns in some periods and held them back in others
- Fees vary widely: dedicated ethical funds with active screening tend to charge more than low-cost index funds, and a higher fee is a drag every year
In summary: the after-fee return of an ethical fund depends on its fee and the screens it applies as much as on the ethical label. Some investors view a possible return difference as an acceptable cost; others prioritise returns.
Greenwashing: What to Watch For
Not all “ethical” KiwiSaver funds are equally rigorous. Red flags:
- Vague language — “we consider ESG factors” without specifying exclusions or screens
- Best-in-class within fossil fuels — still holding oil companies that score highest on ESG metrics
- No public exclusions list — ethical providers publish exactly what they exclude and why
- Light screening only — excluding cluster munitions (already banned under NZ law) while holding tobacco, gambling, or fossil fuels
Questions to ask your provider:
- What industries or activities do you exclude?
- Do you publish a list of excluded companies?
- Do you engage with companies on ESG issues, or just exclude?
- How are ESG screens applied — negative screening, positive screening, or both?
Ethical Screening and Fees
Ethical screening and low fees don’t always come together: some index funds apply a short exclusion list at a low fee, while the broadest screening tends to come with active management and higher fees. The ethical provider guide lists each provider’s screening and fees side by side, and the KiwiSaver fee comparison by fund type covers fees across all funds.
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.
- The provider's latest fund update: gives the fund's current fees, returns and holdings.
Frequently Asked Questions
Does ethical KiwiSaver perform worse than conventional funds? Over long periods, the evidence is mixed. Higher fees on dedicated ethical funds are a consistent drag. The exclusion of fossil fuels has varied in impact depending on the period. Whether there is a return difference depends on the fund and the period.
Are all KiwiSaver providers required to disclose their ethical policies? Providers must disclose their investment policies and objectives in their Product Disclosure Statement (PDS). However, “ethical” is not a regulated label — providers self-define it. The FMA requires accurate disclosure but doesn’t certify funds as ethical.
Can I get an ethical KiwiSaver fund and still capture the employer match? Yes. Ethical funds are just a fund type within KiwiSaver. The employer match and the government contribution apply regardless of which provider or fund type you choose.
What’s the difference between ESG and ethical investing? ESG (Environmental, Social, Governance) is a framework for evaluating companies based on non-financial factors. Ethical investing often incorporates ESG analysis but goes further — using it to exclude or include companies based on value judgements. A company can score well on ESG metrics while still operating in sectors some investors consider unethical (e.g. a “clean” mining company).