Bad blood brewing over KiwiSavers’ exposure to Palestine

Tuesday, 13 August 2024

The war in Gaza, which began with Hamas’ bloody attack on October 7, has been a humanitarian disaster, and had brought the Middle East to the verge of regional war. (AP Photo/Abdel Kareem Hana)

Ethical investing charity Mindful Money says the amount of KiwiSaver money invested in companies involved in constructing and financing Israeli settlements in Palestine has risen.

But the investment charity’s stance and advocacy has put it at odds with fund manager, Simplicity, which thinks its numbers are dodgy and that is straying from ethics into politics.

In November last year, Mindful Money founder Barry Coates called on KiwiSaver providers to sell any investments they held in companies directly involved in the settlements, which have been ruled illegal by the International Court of Justice.

But Coates said the latest data released by KiwiSaver funds showed the total amount invested in companies directly involved in the settlements increased by 20% in the six months to March to $85 million.

Mindful Money’s November divestment call came as a humanitarian disaster was unfolding in Palestine as Israel sought to destroy the military capacity of the Palestinian Sunni Islamist political and military organisation Hamas, which had launched a bloody attack on Israel on October 7 and still holds Israeli hostages.

Coates said Mindful Money’s research showed investors were overwhelmingly opposed to investing in companies that produced weapons, or were involved in human rights violations.

John Berry, chief executive of the Pathfinder KiwiSaver scheme, said each time Mindful Money highlighted the KiwiSaver connection with Palestine, there was an increase in people switching to the Pathfinder scheme, which avoids investing in weapons-makers.

Families of hostages in Gaza criticize Prime Minister Netanyahu, accusing him of prioritizing his political survival over securing a deal for their loved ones' release, leaving over 100 hostages still in captivity.

In July, Mindful Money published data showing 123 KiwiSaver funds had money invested in companies producing weapons being used by Israel in Gaza, and Berry said that month saw some of the largest ever influxes of new investors to Pathfinder.

However, Sam Stubbs, chief executive of Simplicity KiwiSaver, which was the first KiwiSaver scheme to exclude weapons-makers, said: “We have been huge fans of Mindful Money, but what we think they are doing now is going down increasingly obscure rabbit holes to generate awareness, or arguably publicity on this.”

“We now think that Mindful Money is wrong. We think their data is incorrect. We feel like it’s gone from an organisation that’s ethically screening things to politically screening things.”

Simplicity invested its global equities and bonds through German asset manager DWS, which ran its investments through environmental, social and governance screens to weed out unethical companies, and weapons-makers, he said.

Simplicity’s Sam Stubbs said he is horrified by what Israel has been doing in Palestine, but it is not his job to play politics with investors’ money.

“They’re the ESG champions of Europe. That’s why we chose them.”

And yet, he said: “We find the finger being pointed at us.”

Stubbs also felt Simplicity had been at the forefront of bringing ethical investment on in New Zealand, but was getting no credit for it.

Simplicity owned investments in four Israeli companies as well as a small amount of Israeli government bonds, after having sold out of three Israeli banks in November after Mindful Money pointed out they were involved in financing settlements in the occupied territories.

Coates said he was confident in Mindful Money’s data, which came from various sources including the United Nations, human rights reports and global ethical investment research company Sustainalytics.

He was saddened by the fallout with Simplicity, and said Mindful Money was focused on providing transparency around ethical issues that New Zealanders felt strongly about.

More than 80% not wanting their money invested with companies with poor human rights records, or which made weapons, he said.

Rockets are fired toward Israel from Gaza on October 7, 2023 in a bloody attack that has prompted a massive military offensive by Israel.

“I think what’s happened is some people have taken our material and passed it around social media groups, and have gone to them (Simplicity) with some stuff that is wrong and misleading,” Coates said.

“The fact that people are out there using other sources of information isn’t something we can control,” he said.

But Coates also said: “Maybe DWS’ position is different from ours, but we have dug into the evidence quite deeply.”

While Simplicity invested through a German fund manager, Coates said many large KiwiSaver schemes were invested through giant US fund managers, which typically did not exclude investments in companies involved in expanding illegal Israeli settlements , or supplied the Israeli military.

“That’s the political overlay of this,” Coates said.

John Berry, chief executive of Pathfinder KiwiSaver, says many investors do not want their money being used to back weapons-makers.

Berry said Mindful Money played an important role in lifting transparency, as it provided a website which people could use to check on whether their KiwiSaver fund owned any companies that were ethically-compromised.

Each year tens of thousands of people shift KiwiSaver provider, with more than a billion dollars being moved between schemes, though Berry said data was not collected on what motivated their moves.

Pathfinder did not have any investments in Israeli companies, or Israeli government bonds, but Berry said that was not because it had a total ban on investments in Israel.

Berry acknowledged there were difficult issues involved with deciding whether or not to invest in weapons-makers, and he was sometimes challenged with the argument that weapons were important for defending democracy.

One of the companies on Mindful Money’s list of companies supplying the settlements, and Israeli military is Lockheed Martin.

Lockheed Martin is also a supplier of ground to air missiles for the New Zealand Defence Force. It is also a supplier to the Australian Defence Force.

But Berry said: “Our members don’t support war and conflict as a way of resolving disputes.”