Heat goes on KiwiSaver investments in fossil fuels

KiwiSaver providers’ investment in the “worst” fossil fuel companies has increased 20 percent in six months, and one responsible investment platform is calling for change.

Mindful Money – which tracks KiwiSaver providers’ investments and provides a tool for investors to see what they are invested in – has launched a campaign calling for action.

Founder Barry Coates described the “worst” fossil fuel companies as those that are still increasing their production of fossil fuels – and investment in those had increased by 20 percent in the six months to September last year.

He said KiwiSaver investments in fossil fuels overall jumped to $4.42 billion in September 2024, an 18 percent increase from $3.75 billion in March 2024.

He said this continued investment in coal, oil and gas companies was in contrast to public sentiment, with 71 percent of New Zealanders saying they wanted to avoid fossil fuel investments.

“These findings reveal an alarming disconnect between how New Zealanders want their savings invested and where their money is actually going. While some KiwiSaver providers have responsibly avoided fossil fuels, others continue to increase their exposure to climate-damaging investments. The increase of 18 percent in a six month period is of deep concern.”

He said the major oil and gas companies had promised for decades to move from fossil fuel production to renewable energy, but were now “doubling down” on fossil fuels.

“It is of deep concern that there has been a 20 percent increase over the past six months in the KiwiSaver fund investments in companies still expanding their production of oil and gas.”

He cited Shell, BP, Woodside Petroleum, Santos and Exxon Mobil. Over the same period, there was an increase in KiwiSaver funds of 7 percent.

“This is reckless at a time when millions of people around the world are suffering from climate-related bushfires, droughts and floods. Instead of lowering the temperature, the expanders are throwing more fuel on the fire,” Coates said.

He said there could also be financial effects for investors.

“Over the past decade, the value of oil and gas companies has fallen far behind the market average. And there are mounting financial risks in the future. When production starts to decline, the value of fossil fuel reserves and production infrastructure is likely to plummet, leaving ‘stranded assets’ that are almost worthless.”

He said the KiwiSaver fund with the largest exposure to these expanding fossil fuel companies was Milford.

Second was Quay St and third was Kernel.

“Some of these top funds holding expanding companies are from passive funds or index investing but others are active investors.”

He said there had been a downward trend in fossil fuel investment previously, but that had changed when Russia invaded Ukraine, spiking fuel prices.

“That led to short term profits and a number of funds piled in there to get short-term returns.”

But Milford head of sustainable investment Frances Sweetman said excluding producers did not address the fact that demand for fossil fuels was still growing.

“The problem is much bigger and more complicated than excluding producers, you have to address the users of fossil fuels as well.

“It feels like a very unusual line in the sand to draw – that the companies buying and using more fossil fuels aren’t a problem, they’re the ones actually pumping out the greenhouse gases. I don’t understand why they are better than those selling the fossil fuels, to me it’s the same. We don’t draw this line in other industries, we don’t blame sugar producers for how much sugar Coca-Cola uses, we blame Coke and expect them to transition their products.”

She said solutions were needed to help people stop using fossil fuels. “You can’t just blame producers and expect them to turn it off.”

Sweetman said she stood by the companies that Milford was invested in, because they were investing in ways to transition for the future.

“We use our role as investors to push companies to do better.”

She said Shell had committed to investing US$10 billion to US$15 billion in low-carbon energy solutions by the end of this year. “It’s one of the few global majors that has got an emission reduction target that includes customer emissions.”

Australian gas producer Santos was a pioneer in carbon capture and carbon storage, she said, which could allow it in future to store the equivalent greenhouse gas emissions to the amount of gas it sold.

She agreed there could be a risk to investor returns if companies weren’t transitioning.

“It’s really complicated, there are a lot of companies that have really big carbon footprints and climate risk we need to be aware of. It’s not just one small pocket.”

Coates said there was already pressure on consumers of fossil fuels as well as the producers.

“The producers have undertaken for decades to transition from fossil fuels to renewable energy but have not done so. In many cases they have benefited from making repeated clams they they have not fulfilled, particularly those producers that are still increasing their production.

Current investors cannot claim that the companies are transitioning or that their investment is making a difference. Many of those companies have also funded fossil fuel deniers and lobbied to block climate legislation and policy, especially – but not only – in the US. The companies that have transitioned have made a positive difference. But the expanders have undermined progress.”

He said investors had been talking about engaging with fossil fuel companies for 30 years but the situation had worsened, not improved.

The KiwiSaver providers with the largest holdings (as a percentage of their portfolio) of fossil fuel companies that are expanding their production:

• Milford
• Quay Street
• Kernel
• Select
• Summer
• SuperLife

The providers with the highest proportion of climate friendly funds:

• Always Ethical (AE)
• Pathfinder
• Betashares Sustainable Leaders funds
• TAHITO funds

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