How ethical investing is making New Zealanders richer.
Investor-turned-entrepreneur Sam Stubbs, the managing director and co-founder of Simplicity KiwiSaver fund, is on a mission to give more agency to everyday New Zealanders.
Born and raised in West Auckland, the son of two school teachers was bought up with a clear understanding of right and wrong. His working-class upbringing, combined with an insatiable desire to give back, has led him to grow one of New Zealand’s biggest and most proactive ethical KiwiSaver funds in the country. It’s working, with the Government recently making Simplicity a KiwiSaver default provider.
How do savings in our pockets translate to a more productive and ethical economy? Sam Stubbs looks towards New Zealand’s future as a more capital-rich country.
With the advent of KiwiSaver, New Zealanders are now saving more money than ever.
KiwiSaver net assets are at an all-time high. At the moment, KiwiSaver’s pool of money is $82 billion, and it’s expected to be $200 billion by 2030. This is by far the widest-held voluntary savings pool in New Zealand.
“New Zealanders have never had so much saved,” Simplicity managing director, Sam says. “It’s increasing at over two percent of GDP per annum.”
Despite these gains in savings and to the economy, many people live paycheck to paycheck, trapped in a working poverty that can make it difficult to advance in life.
According to Stats NZ, the average weekly income for New Zealanders (accounting for a full-time work week) in the March 2021 quarter is $1,328 – equating to $69,078 a year.
While this may seem like an improvement, housing and rent costs have soared.
Median prices for residential property across New Zealand increased by 24.3 percent from $665,000 in March 2020 to $826,300 in March 2021, according to REINZ data – New Zealand rents saw the largest year-on-year increase in two and a half years in March, growing by six percent to $540 per week, according to the latest Trade Me Rental Price Index.
That’s where Simplicity comes in. Sam describes Simplicity as a dignity company, working to give average New Zealanders
dignity in retirement, and the dignity of home ownership.
How does one do that? The answer is quite simple.
“A dignified life is one with choices. If you can’t choose where you live, what you eat, when and where you go on holiday, it’s hard to have a life with dignity,” Sam says.
“So how do you get choices in life? It’s simple, by having more money. Money gives you choices, and choices give you dignity. “So the whole purpose of what we’re doing is just to make ordinary New Zealanders more money, more choices and more dignity.”
Ethical investing – the breakdown
Around five years ago, people started focusing on where their savings were invested. Much of this stemmed from the revelation that many KiwiSaver funds were invested in companies making nuclear weapons. For many New Zealanders, KiwiSaver was their start in ethical investing.
But what is ethical investing? “It’s hard to describe,” Sam says, “because there are many different views of what is ethical.
“For us, it starts with not investing in those industries where a majority of members would not want their money invested. So actually, you’re not making the decisions, you’re just listening to your members about what matters to them.
“So, for example, most New Zealanders, maybe all New Zealanders, would not want their money invested in nuclear weapons, or cluster munitions, or automatic rifles, and all those sorts of things. By listening to members, you get a sense of their ethics.”
It’s a complex issue with multiple facets. Sam uses the example that some people might not want to invest in fossil fuels, but excluding the plastic industry as a whole creates a whole realm of other problems.
“It’s easy to eliminate single use plastic bags, but what about heart valves, cochlear ear implants or heart valves, all of which use plastic.
“When you talk about investing ethically, you have to make tough decisions. It’s not easy. The ethics of one person are not the ethics of the next.”
In the ethical investing industry, Sam says New Zealand is unquestionably a world leader.
“If you look at the percentage of our KiwiSaver funds invested with some sort of ethical guidelines, it’s well over 70 percent. That is way higher than any other developed nation, and a wonderful thing.”
“New Zealanders have a very, very strong fairness gene that runs through their personal lives, and where they want their savings invested.”
This can be seen with New Zealand’s strong stance in the anti-nuclear movement, as well as being the first nation in the world that gave women the right to vote.
An economic renaissance
New Zealanders are often praised for their ingenuity and resourcefulness, part of the ‘number 8 wire’ mentality, born from being accustomed to its status as a poor nation, with insufficient local savings.
Examples of lack of money nationally include the poor-quality housing stock and the ageing infrastructure, like with Wellington’s sewers.
“We’ve had a national savings crisis for over a century. We’ve never saved enough money to actually build the New Zealand we might want to live in,” Sam says. “A classic example is a lack of safe housing.”
In this regard, Simplicity is putting its money where its mouth is. In March, it committed $20 million in social housing through the Community Finance scheme, which seeks to raise $100 million to build new affordable and social housing.
“The average New Zealander for the longest time has saved by buying a house and paying off the mortgage. The problem for the economy though is that while the house is a wonderful place to live in, and gets high financial returns for the owner, it doesn’t add to the productivity of
“And there’s been the view in New Zealand that if you buy a house and pay your taxes, the government will handle the rest – a result of romanticisation of a bygone era, the 50s and 60s. It’s not the reality nowadays, though.
“The modern reality of New Zealand now is that we save too much in housing, and ironically, it’s built too many substandard houses.
“We haven’t saved enough in the productive economy, which means we don’t have businesses big enough, employing enough people, and paying high salaries.”
Places like Germany and Switzerland, or even England and the United States, are better off in terms of higher income and savings. It’s why New Zealand experiences the ‘brain drain’, or skilled workers looking for higher salaries overseas.
Some 600,000 Kiwis live across the ditch in Australia, where the average income is $1,711 AUD a week, or approximately $1,836 NZD, according to the latest data from the Australian Bureau of Statistics. That’s $500 more a week than the average weekly earnings in New Zealand.
“But we’re beginning to address it – as we save more money, the money will find its way into businesses, and they will employ more people.
“I think we’re about to enter an economic renaissance in New Zealand. We’re going to have some of the best decades we’ve had since the 1950s, and maybe even further back than that.
“Why? Because we’re about to become capital richer, and all with our own savings. KiwiSaver will be responsible for much of this, just as superannuation has been in Australia.”
Ethical investing is not just a trend – it’s a movement that’s been compounding as we become more uncertain about the future of our planet and the effects of issues like climate change, unsafe housing and social unrest.
“It’s no longer an on the margin, airy-fairy thing. It’s now central to how we think about consuming, investing and living. It will be a defining theme for the rest of our lives.
“We should be constantly testing whether our members ethics line up with how we invest money. We will always be challenging accepted wisdom and mores.
“The finance industry plays an important role in the future of society, because where it invests, many billions of dollars in the future will change the way we live. It’s a debate that should never go away.
“But it’s a very bright future with much more saved, much more invested in the productive economy, with more of an ethical lens. It’s the best way to give our children better lives, in a healthier planet.”
By Claire Wright