Managed funds must have a Statement of Investment Policy and Objectives (SIPO) that sets out what the fund is trying to achieve and the rules about what the fund can and cannot invest in. They often also have a responsible investment policy. If you cannot find these documents on your provider’s website ask them for a copy.
Think about not only what these documents say, but what they do not say. For example if these documents are silent on investing in assets linked to fossil fuels, there is likely no restriction on the fund investing in that industry.
Read the fine print and ask the provider if something is unclear.
For example, if there is an exclusion on investment in fossil fuels, what does this mean, how does this this exclusion work and are there any exceptions to the exclusion?
It may only apply to investments in companies that are involved in fossil fuel extraction or production, but not those involved in distribution.
How is 'involved' defined? The fund’s policy may include a threshold for percentage of revenue earned from fossil fuels or assets that are oil/gas/coal reserves, below which a company is not classed as 'involved'.
It may only apply to equity investments the fund makes and not, for example, fixed interest investments such as bonds (which are still a form of financing for fossil fuel companies).
Even the equity investment exclusion may be qualified – it may only apply to equity investments made directly by the fund rather than indirectly by investing in another fund (which is a common strategy used by fund managers).
If you want to check whether your KiwiSaver fund or managed fund invests in a specific company, you can download a full list of assets from Sorted’s Smart Investor tool. Smart Investor will also link you to key documents for the fund, such as the SIPO.
It’s also important to check how the ethical fund will deal with unforeseen events that may mean an asset no longer meet its ethical investment criteria. How will they decide? Will they sell the asset? If so, when and in what circumstances?
Learn more and know how to check the impact of your investments in the delivery of fair treatment of workers and ethical and sustainable work practices:
Go to Employment.govt.nz