Is your KiwiSaver as green as it claims to be?

KiwiSaver members who are worried about where their money is invested need to put pressure on fund managers for the answers they want, the Responsible Investment Association of Australasia says.

It has released its latest benchmark report for this country, which shows that responsibly invested funds by its measure grew to $294 billion last year, up 13 percent.

But the report noted that "greenwashing" - making investments seem more responsible than they really were - was a critical challenge. This was the biggest deterrent to market growth, the report said.

Co-chief executive Dean Hegarty said people who were worried about their KiwiSaver investments should think about what was important to them and look at the options in the market.

"Most KiwiSaver funds will be relatively clear in the way they label funds, the way they're marketing them and what's on their website…. The challenge is understanding and having confidence in understanding what the fund says it is going to do and how it's labelled is in line with what it is doing."

RIAA's certification programme covered about 60 percent of the KiwiSaver market and investors could have confidence in the claims of those funds. The Mindful Money platform also allows people to look at where their funds are invested.

Beyond that, Hegarty said it could be tricky. "A lot of investments are hugely complex … investments are split all over the world and spread across a lot of different asset classes."

He said people could contact their KiwiSaver providers directly and ask where their money was being invested. "If you have concerns around particular aspects of where assets are sitting, ask. If you don't like the response there are a lot of options to switch in the market to someone who gives you an answer you do like."

Sometimes, it was appropriate for fund managers to stay invested in a sector to help drive change, he said, rather than completely pulling support.

"There are some areas where it's simply not ok to be invested in, and no amount of engagement is going to drive change. I'm thinking tobacco, nuclear ballistic missiles, things like that - there's not a lot of benefit to being involved in those industries.

"But we do need to be careful and really clear that simply divesting from something does not drive change particularly when you're dealing in industries like energy that need to transition, where we are looking at transitioning away from dirty fuel, dirty processes, dirty materials into things that are cleaner. Simply selling those and effectively throwing your rubbish over the fence and leaving it for someone else to deal with doesn't make the rubbish fo away."

He said research showed both retail and institutional investors wanted to align their values closely with their investments.

"We are living in a world where things are happening that in a lot of instances we don't feel we have a lot of control over. One thing people tell us is they believe where investments sit can have an impact on things like the climate and social challenges we are facing."

Hegarty said it was not that long ago that responsible investment was "nice to have". "Now it's how investments are being managed in New Zealand."

"Responsible investment has shifted from niche to necessity, it's now a foundation of how the financial industry operates. But rising greenwashing concerns put the spotlight on integrity and accountability. It's positive to see investment managers being much more careful when making claims and labelling products. But there are also industry standards that could be better supported by government and regulators to give everyone the clarity and confidence they deserve," he said.

Mid last year, the Financial Markets Authority highlighted greenwashing as an issue.

Then-executive director of response and enforcement Paul Gregory said: "Providers using terms like ethical and responsible to describe their products must ensure there is cohesive substance in how they design such products, how they market and advertise them and, most important, how they manage them."

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