Ethical KiwiSaver Funds

🔍 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.

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.

⚖ 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.

💡 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.

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.