The most recent survey showed that three-quarters of New Zealanders want their KiwiSaver and other investment funds to be managed ethically, and over half of New Zealanders would be willing to move their funds if the investments do not align with their values. There is also commonality amongst the types of industries New Zealanders want to avoid their money going towards year to year. Around 90% of New Zealanders want to avoid companies which commit human rights violations or environmental damage, while 80% want to avoid companies which produce or sell weapons and firearms.
Unfortunately, billions of New Zealand’s investments are currently going towards these harmful companies that New Zealanders want to avoid. Mindful Money’s free and easy-to-use Fund Checker tool on their website analyses portfolio holdings for all New Zealand KiwiSaver and retail investment funds, showing both direct and indirect holdings in these key issues of concern, so users can understand the potential harm from their investments. Users can then find a fund that most closely aligns with their values using the Fund Finder tool.
One issue of concern that ranks high amongst New Zealanders year to year is fossil fuels. Currently, 75% of people want to avoid companies which produce fossil fuels, while 73% want to avoid companies which generate power using fossil fuels. With the abundance of such companies in existence and the fossil fuel industry saturated with claims of net zero and transitions toward renewable energy, it becomes even more crucial for New Zealand investors to understand where their money is going. They should not only know whether their funds are invested in fossil fuel companies, but also whether the companies they do invest in are actually committed to their climate and renewable energy goals.
That’s where Mindful Money’s latest report comes in. “Fossil Fuel Investment in Transition or in Denial?” analyses the global oil and gas industry to understand the role that they are playing in transitioning towards a safe climate.
Leading scientists are saying we need to adhere to the 2015 Paris Agreement’s goal to limit the increase to 1.5°C, recognising that this would avoid the most catastrophic impacts of climate change.
However, the report shows that most of the fossil fuel industry remains in denial of their role in the changing climate, and many of their promises to transition towards net zero climate emissions have been exposed as greenwash. Although many major oil and gas producers have announced bold climate ambitions, they are doubling down on their core business instead of investing in clean energy. Two-thirds of major oil and gas companies plan on expanding their exploration and field development over the next seven years.
These companies, highlighted in the report, include the likes of Shell, BP, ExxonMobil, and many more that are off track with global climate goals. As an example, Shell recently announced they will backtrack on their commitment to cut annual oil production by 2030, meaning emissions of an additional 29m tonnes of carbon dioxide per year. This amount, from a single company, is almost as much as New Zealand’s annual emissions of carbon dioxide. Energy Monitor also points out that these major companies are prioritising shareholder payouts and investments in oil and gas above all else, with Exxon, Chevron and ConocoPhillips each spending approximately 0% of their capital expenditure on renewable energy last year.
By contrast, there are companies making good progress, with serious commitments to the climate transition. The report identifies those companies within the fossil fuel sector that are making credible efforts for a pathway consistent with a 1.5°C global temperature rise. Eight electricity generators internationally were identified as being in transition. However, as hundreds of companies were analysed as part of this research, a grand total of eight companies making good progress is alarmingly low, especially given the urgency of the climate crisis.
These companies in transition are electricity utilities switching their production to solar, wind, and geothermal, and have clear goals to be completely renewable energy sources by 2040. There are no fossil fuel producers currently aligned with a 1.5°C pathway. The company that attracts the most New Zealand investment is Contact Energy, which is due to phase out its oil and gas power stations over the next few years and invest heavily in geothermal power. Another example is the Danish power company Ørsted, which historically produced 85% of its electricity from coal in 2009 but has since transitioned to being the world’s largest offshore wind power producer, with over 90% of its energy generation now coming from renewables.
The report also shows that New Zealand KiwiSaver and retail investment funds are increasing their investment in the companies that are expanding, rather than companies that are transitioning. Currently, almost NZD $3 billion is invested in fossil fuel companies expanding their production, compared to around NZD $1.7 billion in companies in transition. Although the share price of oil has increased over the past year, New Zealand’s investment in the expanders has more than doubled this amount, increasing by around 80%.
A common reason cited by fund managers for continuing to invest in fossil fuels is their belief that they can influence the major oil and gas companies to lead the transition to renewable energy. The report shows this is not happening for most of the oil and gas sector. Instead, profiteering during high oil and gas prices as a result of Russia’s invasion of Ukraine has been distributed to shareholders and used to expand production. Individuals who invest in those funds need to understand that the majority of their investments are in companies that are contributing to the climate crisis, rather than investing in climate solutions.
These investments also expose investors to considerable financial risk, due to the danger of stranded assets as the world moves towards decarbonisation. This is one of the reasons that investing in fossil fuel companies has been a shockingly poor financial investment over the past decade, averaging losses of 6% per year compared with gains of 10% on average for the market as a whole. As three-quarters of New Zealanders want to avoid fossil fuels in their investments, and the risks of further losses from fossil fuel investments are growing, the current state of New Zealand investment does not reflect what New Zealanders want or expect from their fund providers.
The report calls for a massive shift in investment away from fossil fuels. Mindful Money’s website includes this analysis of fossil fuels, as well as other issues that New Zealanders want to avoid in their investments. When checking funds, there are now icons displayed next to fossil fuel companies, to allow all Kiwisaver and retail investors to find out what fossil fuel companies they are invested in, and whether these companies are in transition or in denial. Investors can then use this information to take action, by switching funds or engaging with their current fund providers, to divest from the climate wreckers and support the renewable energy transition.
Many New Zealand companies and individuals are trying to reduce their carbon footprint, but very few focus on reducing the emissions that they finance through their KiwiSaver or other funds. Another of Mindful Money’s analyses shows this is one of the biggest sources of individual emissions. As the old saying goes, “money makes the world go around.” We need to reclaim control over our investments and make money a force for good.