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Ethical KiwiSaver Funds

🌱 Investing in Line With Your Values

Many KiwiSaver members want their money to do more than grow; they want it invested in a way that fits their values, avoiding harmful industries and favouring responsible companies. Ethical KiwiSaver funds, sometimes called responsible or socially responsible funds, aim to do this. Understanding how they work, and the trade-offs and the marketing around them, helps you choose a fund you are comfortable with without giving up sound investing principles.

Key Point: Ethical KiwiSaver funds invest with environmental, social, and governance considerations in mind, typically by excluding certain industries and sometimes by favouring responsible companies. They still come in the usual risk types, from conservative to growth, so an ethical fund is a way of investing, not a risk level. They do not automatically cost more or return less, but you should check what a fund actually does, because ethical labels vary widely and some are stronger than others.

Why People Choose Ethical Funds

  • To avoid profiting from industries they object to.
  • To support companies with better environmental and social practices.
  • To align their retirement savings with their personal values.
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🔍 How Ethical Funds Work

Ethical and responsible funds use a few main approaches, often in combination. Knowing them helps you read what a fund really does, rather than relying on a label.

ApproachWhat it does
Negative screening (exclusions)Avoids certain industries, such as ones the fund deems harmful
Positive screeningFavours companies with strong environmental, social, and governance practices
Best-in-classPicks the better performers on responsibility within each sector
EngagementUses the fund influence as a shareholder to push for better behaviour

Exclusions Are the Most Common

The most common approach is excluding industries the fund considers harmful. The exact exclusions vary between providers, so two ethical funds can hold quite different things. This is why the label alone tells you little; what matters is the fund stated approach and its actual holdings. See our guide on choosing a KiwiSaver fund.

Ethical is a method, not a risk level: An ethical fund still sits somewhere on the conservative-to-growth scale. You still choose the risk level that suits your timeframe, then choose an ethical version of that risk level if it matters to you. Do not confuse being ethical with being low risk.

⚖ Cost, Returns and Greenwashing

Do Ethical Funds Cost More or Return Less?

A common worry is that investing ethically means worse returns or higher fees. The evidence is mixed and depends on the fund: ethical funds do not automatically underperform, and many perform comparably to mainstream funds. Fees vary by provider just as they do for any fund. As with any KiwiSaver fund, you should compare fees and the long-term approach, not assume an ethical label means a worse deal.

Watch for Greenwashing

Because ethical investing is popular, some funds market themselves as responsible while doing relatively little. This is called greenwashing. A fund might exclude only a tiny slice of holdings, or use vague language, while still holding much that a values-driven investor would object to. The defence is to look past the marketing to the fund actual exclusions and holdings.

Read what the fund says it excludes and favours
Check the actual holdings if they are published
Compare the fees against similar funds
Decide if the approach genuinely matches your values
Look past the label: The word ethical or responsible on a fund is not regulated into a single meaning, so funds vary widely. Read the fund own description of what it excludes and how it invests, and check the holdings if available, rather than trusting the name.

💡 Choosing an Ethical Fund

A Sensible Process

  1. Pick your risk level first: match it to your timeframe, as with any KiwiSaver fund.
  2. Decide what matters to you: which industries you want to avoid or support.
  3. Read the fund approach: what it actually excludes and favours, not just the label.
  4. Check the holdings where published, to see if they match the claims.
  5. Compare fees against similar funds, ethical or not.
  6. Confirm it still suits your retirement goals: values and sound investing can go together.

You Do Not Have to Choose Between Values and Sense

Choosing an ethical fund does not mean abandoning good investing principles. You still want an appropriate risk level for your timeframe, reasonable fees, and a provider you trust. A well-chosen ethical fund can deliver all of that while reflecting your values. The mistake is either ignoring values entirely, or choosing on values alone while overlooking fees and suitability.

Check what you are already in: Many members never look at what their KiwiSaver invests in. Whether or not you choose an explicitly ethical fund, it is worth checking your current fund holdings and approach, so your money is somewhere you are comfortable with.

Use the KiwiSaver Calculator to project your balance and the KiwiSaver Fee Calculator to compare fees. Final word: ethical KiwiSaver funds invest with environmental, social, and governance factors in mind, mainly through exclusions, while still coming in the usual risk types. They do not automatically cost more or return less, but labels vary, so read the actual approach and holdings, watch for greenwashing, and keep good investing principles alongside your values. This is general information, not personalised financial advice.

🎯 Test Your Knowledge

Quiz on Ethical KiwiSaver Funds (20 Questions)

1. Ethical KiwiSaver funds invest with:
Environmental, social, and governance considerations in mind
No strategy
Only the highest risk
Guaranteed returns
2. An ethical fund is:
A guaranteed low-risk fund
Always conservative
Always growth
A way of investing, not a risk level
3. The most common ethical approach is:
Guaranteeing returns
Negative screening, excluding certain industries
Holding only cash
Avoiding all shares
4. Positive screening means:
Excluding everything
Holding only bonds
Picking randomly
Favouring companies with strong responsible practices
5. Engagement means an ethical KiwiSaver fund:
Sells all shares
Avoids investing
Uses its shareholder influence to push for better behaviour
Pays no fees
6. Two ethical funds can:
Always hold the same
Never differ
Hold only cash
Hold quite different things, as exclusions vary
7. Before choosing an ethical KiwiSaver fund, you should pick:
The ethical label only
Your risk level first, to match your timeframe
The highest risk always
No risk level
8. Do ethical funds automatically return less?
Yes, always
They never have returns
No; the evidence is mixed and many perform comparably
They are risk free
9. Fees on ethical funds:
Are always higher
Are always zero
Are set by the government
Vary by provider, like any fund
10. Greenwashing is when a fund:
Excludes everything harmful
Has the lowest fees
Markets itself as responsible while doing relatively little
Guarantees returns
11. The defence against greenwashing is to:
Trust the name
Look past the marketing to the actual exclusions and holdings
Pick the cheapest
Ignore the approach
12. The word ethical on a fund is:
Not regulated into one fixed meaning, so funds vary
A strict legal definition
Always the same
Banned
13. To check a fund genuinely matches your values, you should:
Trust the brochure
Guess
Read its description and check holdings where published
Ask a friend only
14. Choosing an ethical fund means you should still want:
An appropriate risk level, reasonable fees, and a trusted provider
To ignore fees
The highest risk
To abandon investing principles
15. A mistake to avoid is:
Matching risk to timeframe
Comparing fees
Reading the approach
Choosing on values alone while overlooking fees and suitability
16. Many KiwiSaver members:
Never look at what their fund invests in
Check daily
Choose only ethical funds
Know every holding
17. An ethical fund still sits somewhere on the:
Cash-only scale
Conservative-to-growth risk scale
Tax scale
GST scale
18. To compare an ethical fund fairly, you compare it with:
Only cash
Similar funds, on fees and approach
A different risk level
Nothing
19. What does best-in-class screening do when picking investments?
Excludes all sectors
Holds only bonds
Picks the better responsibility performers within each sector
Ignores responsibility
20. The best summary of ethical KiwiSaver funds is:
A way of investing by values, in the usual risk types; read the real approach and keep good investing principles
A guaranteed low-risk fund
Always worse value
The same as cash

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