Ethical Investing in New Zealand: A Practical Guide

More New Zealanders want to know not only how their money is performing, but also what it is supporting.

Ethical investing aims to align investment decisions with an investor’s values. That may mean avoiding industries or activities the investor considers harmful, favouring businesses making a positive contribution, or choosing fund managers that actively encourage better environmental and social practices.

Interest is significant. Research published in 2025 by Mindful Money and the Responsible Investment Association Australasia found that 75% of New Zealanders expected their KiwiSaver and managed funds to be invested ethically and responsibly.

However, the word “ethical” can mean different things to different people. A fund that suits one investor’s values may be unacceptable to another. Understanding what sits behind the label is therefore just as important as choosing the right risk profile, investment strategy and fee structure.

What is ethical investing?

Ethical investing is an approach that considers the social, environmental and governance impact of an investment alongside its financial prospects.

For some investors, it is mainly about avoiding certain activities. Common concerns include:

• tobacco;
• gambling;
• controversial weapons;
• fossil-fuel extraction;
• animal testing;
• intensive farming;
• human-rights abuses; and
• poor environmental practices.

Other investors are more interested in supporting positive change through areas such as renewable energy, sustainable infrastructure, healthcare, clean water or businesses with strong employment and governance practices.

There is no universal definition of an ethical company or an ethical investment fund. Investment providers use different policies, definitions, revenue thresholds and exceptions. A fund may describe itself as fossil-fuel-free, for example, while still allowing limited exposure to a company earning a small proportion of its revenue from fossil-fuel-related activities.

This does not automatically make the fund unsuitable. It does mean investors should look beyond its name and marketing.

Ethical, responsible, sustainable and ESG investing

Several related terms are used in this area, sometimes interchangeably:

Ethical investing generally starts with the investor’s moral or personal values and seeks to avoid or support particular activities.

Responsible investing considers environmental, social and governance issues as part of the investment process. It may include exclusions, but it can also involve engagement with companies and voting as a shareholder.

Sustainable investing tends to focus on businesses and activities that may contribute to a more sustainable economy or address long-term environmental and social challenges.

ESG investing assesses environmental, social and governance factors that could affect a company’s risks, quality or long-term prospects. ESG analysis does not necessarily mean that a fund excludes every industry an investor might regard as unethical.

Impact investing deliberately seeks a measurable social or environmental benefit alongside a financial return.

The differences matter. A fund that integrates ESG risks may still invest in oil companies, banks or defence businesses. An impact fund may be more concentrated than a broadly diversified ethical fund. The label alone does not tell you exactly what you own.

How do ethical investment funds choose investments?

Ethical and responsible investment funds can use several methods.

Exclusions or negative screening

The fund removes companies or industries that do not meet its ethical policy. Exclusions are often subject to revenue thresholds, so it is important to understand how much exposure may still be permitted.

Positive screening

The manager favours businesses with stronger environmental, social or governance practices than their industry peers, or companies contributing to selected positive outcomes.

ESG integration

Environmental, social and governance factors are considered alongside traditional financial analysis. The manager may examine issues such as carbon exposure, employee safety, supply-chain standards, board quality and regulatory risk.

Stewardship and engagement

Rather than automatically selling an investment, a fund manager may use its influence as a shareholder to vote, engage with management and encourage change. Investors should look for evidence of what the manager has actually done and how it reports progress.

Impact investing

Capital is directed towards investments intended to produce a positive and measurable outcome, such as renewable-energy projects, social housing or improved access to healthcare.

Many ethical funds combine several of these approaches.

Does ethical investing mean accepting lower returns?

Ethical investing does not automatically produce either lower or higher returns.

Excluding investments reduces the range of companies available to a fund manager and can cause an ethical fund to perform differently from the wider market. If an excluded sector performs strongly, the fund may lag. At other times, avoiding companies facing regulatory, environmental or reputational problems may be beneficial.

Returns are also influenced by the fund’s asset allocation, investment style, management decisions, fees and level of diversification. These factors can have a greater effect than the ethical policy itself.

The more useful question is not whether ethical investing always performs better or worse. It is whether a particular fund offers a sound investment strategy, appropriate diversification and acceptable fees while applying an ethical policy that genuinely reflects your preferences.

Past performance can help you understand how a fund has behaved, but it is not a reliable guide to future returns.

Ethical KiwiSaver options

For many New Zealanders, KiwiSaver will become one of their largest investments. It is therefore a logical place to consider whether their money is aligned with their values.

When comparing ethical KiwiSaver funds, consider:

• the provider’s complete ethical or responsible investment policy;
• the activities it excludes and the thresholds it applies;
• any exceptions the policy allows;
• whether the fund actively selects positive investments;
• how it reports its underlying holdings;
• its risk category and mix of growth and defensive assets;
• fees and long-term performance; and
• whether the fund suits your retirement or first-home time frame.

Ethics should not replace the basic investment questions. A highly ethical fund can still be unsuitable if it exposes you to more risk than you can tolerate, is too conservative for a long investment period, charges excessive fees or is poorly diversified.

Your KiwiSaver choice should also be considered alongside your other investments. Holding similar ethical funds across KiwiSaver and a private portfolio can create unintended duplication or concentration.

How to tell whether an ethical fund matches your values

Start by identifying the issues that matter most to you. It is easier to evaluate a fund when you know which preferences are essential and where you may accept a practical compromise.

Then ask:

1. What does the fund exclude?
   Look for specific definitions rather than broad promises.
2. What revenue thresholds apply?
   A company may be permitted if the restricted activity represents less than a stated percentage of its revenue.
3. Are exceptions allowed?
   Find out who approves them and whether they are disclosed.
4. What does the fund actively support?
   Some funds only avoid harm, while others deliberately seek positive environmental or social outcomes.
5. Can you see the underlying investments?
   Transparent holdings and regular reporting make it easier to test the marketing against the reality.
6. How does the manager use its influence?
   Voting and engagement records can show whether responsible ownership is happening in practice.
7. Is it still a good investment?
   Review diversification, risk, fees, performance, liquidity and how the fund fits within your wider financial plan.

No fund is likely to match every investor’s values perfectly. The aim is to make an informed choice and understand the compromises involved.

Building an ethical investment portfolio

Ethical investing does not have to be an all-or-nothing decision. Depending on your priorities, it may involve:

• selecting an ethical KiwiSaver fund;
• using one diversified responsible investment fund;
• combining several funds across different asset classes;
• excluding particular sectors from a private portfolio; or
• allocating part of a wider portfolio to sustainable or impact investments.

A portfolio should still be built around your goals, time frame, need for income and ability to tolerate market falls. Ethical preferences are an important part of the design, but they sit alongside the usual requirements for diversification, risk management and sensible costs.

BeaconPoint Private Wealth can consider your ethical and responsible investment preferences when reviewing your KiwiSaver, selecting a managed fund solution or developing a private wealth portfolio.

The first step is a clear conversation about what matters to you and what you need your investments to achieve.

Arrange a confidential, obligation-free consultation.

Frequently asked questions

Is ethical investing the same as ESG investing?

Not necessarily. Ethical investing is generally driven by personal values and may exclude specific activities. ESG investing considers environmental, social and governance factors when assessing investment risks and opportunities, but an ESG fund may still own companies or industries that some investors would prefer to avoid.

Can I invest my KiwiSaver ethically?

Yes. A number of KiwiSaver providers offer funds with ethical or responsible investment policies. Their approaches differ, so compare their exclusions, thresholds, holdings, risk level, fees and performance before choosing.

Are ethical investment funds more expensive?

Some are, but not all. Fees vary by provider, strategy and management style. Compare the total fees with the service, research, diversification and investment approach you receive rather than assuming the ethical label justifies a higher cost.

Will ethical investing reduce my returns?

Not automatically. Ethical restrictions can cause performance to differ from the wider market, positively or negatively, at different times. Asset allocation, investment selection, diversification and fees also affect returns.

How can I avoid greenwashing?

Read the fund’s policy, check its holdings, understand its thresholds and exceptions, and look for clear reporting of outcomes and shareholder activity. Specific, verifiable information is more useful than broad claims such as “green”, “sustainable” or “responsible”.

Can an adviser build a portfolio around my ethical preferences?

Yes, although the available investments and the degree of customisation will depend on the amount invested and the service used. An adviser can help define your priorities, assess suitable investments and balance your ethical preferences with risk, return, fees and diversification.

This article provides general information only and does not constitute personalised financial advice. Everyone’s situation is different. We recommend obtaining financial advice before making investment decisions. BeaconPoint Private Wealth Limited is a licensed Financial Advice Provider. Our disclosure information is available free of charge on our website.