Ethical funds now make up 39 percent of all KiwiSaver members. File photo. Photo: 123RF
The Booster Socially Responsible High Growth fund is the top-performing ethical KiwiSaver fund, according to new data from National Capital.
This was ranked as the standout performer by the advisory firm in its Value For Money report, based on historical five-year returns until March 2024.
The report analysed 110 KiwiSaver funds, with half of these classified as Environmental, Social, Governance (ESG) focused.
The majority of KiwiSaver accounts remain with traditional fund managers, with ethical or ESG funds now making up 39 percent of all KiwiSaver members.
That equates to 1,099,103 New Zealanders investing in ESG, with the total value of these investments at retirement projected to be $244 billion, underscoring the growing interest by Kiwis towards ethical investing.
The top-ranked ESG-focused funds in the report were also awarded in High Growth, Growth, Balanced, Moderate and Conservative categories.
High Growth:
Booster's Socially Responsible Growth fund - 9.99 percent
Growth:
Simplicity Growth - 7.82 percent
Balanced:
Superlife Ethical - 6.26 percent
Moderate:
BNZ Moderate - 3.73 percent
Conservative:
Fisher Funds Two CAsh Enhanced - 2.98 percent
The Value For Money report showed some ethical funds out-performed their traditional KiwiSaver rivals.
National Capital financial advisor Ilma Coverdale said ESG Funds provided better returns in two of the five managed risk categories compared to traditional funds.
Over the past five years, ethical funds outperformed non-ESG funds in the Aggressive and Moderate risk profiles.
Greenwashing fears?
Concerns about greenwashing have eased in recent times, with increased regulator and investor scrutiny, according to the KiwiSaver expert.
"There is concern that there is some greenwashing and that's why over the last few years the governing bodies and regulatory bodies have tried to raise the standards so that companies are basically doing what they are advertised to be doing," Coverdale said.
"That's also why there are slightly higher fees because fund managers need to make sure and really delve deeper into the research.
"Investors themselves are also wising up. There are doing the research to make sure they're not investing in funds that might potentially be greenwashing."
Higher fees
Coverdale said ethical KiwiSaver funds were justified in charging higher fees, compared to traditional fund providers.
National Capital said fund managers needed to spend more time researching the claims of ethical or socially responsible investment companies.
Higher fees were not necessarily a barrier to strong financial performance, the report showed.
"They are a little bit higher than non-ESG funds but not by much," Coverdale said.
"And when you look at the performance after the fees it more than justifies the fee that one is paying.
"It's just important to choose the right provider and make sure that you are getting value for money.
"There are plenty of ESG funds out there that do give fantastic value for money and the returns are on par with non-ESG funds."