The policy, which will be enacted from July 2021, will require ethical standards for default KiwiSaver funds to protect those who do not make a specific choice of fund when they sign up for the system.
The current terms of nine existing KiwiSaver providers would expire in June 2021 and the rules would apply to anyone wanting to default into the fund after that date.
As well as fossil fuels, they would also be banned from investing in landmines and illegal weapons.
The decision was taken by the Government following consultations with groups such as climate activist group 350 Aotearoa, charity Mindful Money and financial services firms.
Barry Coates, founder and chief executive of Mindful Money commented: “Annual surveys undertaken by Colmar Brunton for Mindful Money show that three quarters of New Zealanders do not want their KiwiSaver funds to be invested in fossil fuels. This new policy on default funds aligns with public values, as well as government policy.”
Research by Mindful Money found $1.6 billion of KiwiSaver funds were invested in companies that were engaged in fossil fuel production. Less than 3% of KiwiSaver investments were so far in funds that excluded fossil fuels.
Coates added: “As well as adopting minimum standards on excluding investments in fossil fuels and weapons, future default KiwiSaver providers will need to be transparent about their ethical standards. However, this is also important to all three million KiwiSaver investors. Minimum standards, transparency and reporting on ethical investment should be applied to the whole KiwiSaver scheme.”
