Sustainability-related investing

Understand what your objectives are

Sustainability considerations can be subjective, which means what one person sees as sustainable may not be the same for someone else. The FMA does not define what is or is not sustainability-related investing.

Focus on how a product describes its approach and whether that aligns with your own objectives.

When considering an investment, ask yourself:

• Do the expected returns and level of risk fit with your investment objectives?
• Do the sustainability-related characteristics match your preferences? For example, excluding certain industries or supporting positive outcomes.

Researching sustainability-related investments

While it can be tempting to rely only on advertising, social media or friends’ opinions, it’s important to dig deeper to understand whether your money will really be invested in things that align with your objectives. Doing your own research can help you make confident decisions.

• Ask the provider for more information about their approach.
• Use online comparison tools.
• Review product disclosures, such as the product disclosure statement (PDS), Statement of Investment Policy and Objectives (SIPO) and Responsible Investment Policy, as well as content on the provider’s website.

Episode 8 of our Jess Learns to Invest podcast explains what ethical investing means, how to assess whether your KiwiSaver or investment fund aligns with your values, and how to navigate greenwashing, trends and jargon.

Get help from a licensed financial advice provider

Sustainability-related investing strategies can be nuanced and complex. A licensed financial advice provider can help you navigate these complexities and make informed decisions, and can offer ongoing support. This may include:

• Identifying investment products (like KiwiSaver or managed funds) that match your investment objectives.
• Explaining risks, returns and claims of different products.

Read more about how to find a financial adviser

Some products may exaggerate their sustainability-related claims. This is called “greenwashing”. It can mislead you into believing a product is more sustainable than it really is.

At a minimum we expect issuers of financial products to follow the below key principles:

Claims need to be clear - They should use plain language and avoid vague or technical statements. Issuers should clearly explain what the product is claiming to deliver, how sustainability considerations are applied in practice, and any limitations or exceptions to that approach, so the overall impression is not misleading.

Substantiate their claims - They should support claims with evidence. Where labels such as “green” or “sustainable” are used, these characteristics are expected to be a material part of the investment strategy and should be clearly explained by the issuer.

The message needs to be consistent - Investors should see consistent terminology and tone across all channels, with any qualifications or exceptions clearly highlighted. Advertising should be balanced and hyperlinks to further information should be kept up to date.

Third-party reliance - Where issuers rely on third-party services, they need to ensure third-party services match actual practices and how they are described. This is because responsibility remains with the issuer.

In New Zealand, financial providers must not mislead or deceive investors. Any claims made by issuers, including sustainability-related claims, should be clear and accurate, and supported by reasonable grounds at the time they are made.

The FMA is responsible for supervising conduct and disclosures by providers, and may take regulatory action where potential breaches are identified.

You can report concerns if you believe:

• Advertising or conduct is misleading or deceptive;
• Disclosures are false, incomplete or confusing; or
• Key information has been omitted.

Read more about how to raise a concern or make a complaint 

Since 2021, all default KiwiSaver schemes must consider environmental, social and governance (ESG) factors, and publish ESG policies.

Details of the investments that must be excluded from default KiwiSaver funds are available in this document: KiwiSaver Default Fund Instrument of Appointment – Exclusions.

All KiwiSaver schemes and managed funds must have a Statement of Investment Policy and Objectives (SIPO). This is a document that explains what the fund aims to achieve and sets out the rules for what it can and cannot invest in.

Some fund managers may also publish a separate Responsible Investment Policy that goes into more detail about their sustainability-related strategy.

If you cannot find these documents, ask your provider for a copy.

What to look for

• Pay attention to what the documents say, and what they don’t say. For example, if a fund’s documents are silent on investing in fossil fuels, it may mean the fund is not restricted from investing in them.
• Understand how exclusions work. Read the fine print and ask the provider if anything is unclear. For example, what counts as ‘involvement’ in a restricted industry? Are there exceptions or thresholds (e.g. revenue limits)? Or does the exclusion apply to all types of investments (e.g. shares, bonds, indirect holdings)?
• Check how the fund will respond if its sustainability-related policy is breached. If an asset no longer meets the fund’s criteria, how will the manager decide what to do?  Will they sell the asset? If so, when and in what circumstances? 
• Stay informed about changes in strategy or ownership. If something seems different from what you signed up for, ask your provider questions.
• Find out what investments the fund actually has. You can see a fund’s full list of investments on Sorted’s Smart Investor investment comparison tool, or the Disclose Register, which is a register for offers of financial products and managed investment schemes under the Financial Markets Conduct Act 2013.  

Green, social, sustainability and sustainability-linked bonds (GSSS bonds) are fixed-income investments that fund sustainable projects such as wind farms or green buildings, or encourage issuers to meet sustainability targets such as carbon footprint reduction.

Before investing, ask:

• What will my money be used for?
• How is the impact measured and reported?
• Is there independent verification of the bond’s status?
• Could the bond lose its certification?
• Does the bond align with my broader investment objectives?

Read more about bonds in our guide to choosing, buying and owning bonds