Ethical investing in KiwiSaver

This is not a contradiction in terms.   You don't have to invest in pornography, gambling, tobacco, weapons or Cliff Richard to make money.   You can invest ethically.

Hang on a minute - Cliff isn't unethical, is he?   Not as far as I'm concerned.  But I know people who would disagree.   Strongly.

Perhaps I am being flippant, but  I am making a point here.   

I can say with total confidence that my ethical standards are not exactly the same as your ethical standards.    Neither of us are necessarily right or wrong - we have complex ethical coding programmed into us over decades.   Family, friends, teachers, work colleagues and everyone else have contributed to this and as a result of all of that - we now have You and what You think is OK.

So how can a fund manager hope to produce a fund that invests in all the things that You are comfortable with?    

To make this even harder, it is common for an active fund manager to keep their investment choices secret.   Why?   Well, they spend a great deal of time and money on research.    If they told you which companies they liked - you (or a competing provider) could just copy it, and save a heap on fees.   It's commercially sensitive information.

So with KiwiSaver, a compromise is to look at the passive investment style.    That is, the money you invest tracks an index (like the NZX50) without making a judgement call on which companies are going to perform the best.  Your investments goes up or down with the movement in that index.

An active fund manager makes these judgements every day in the hope that they will beat the index. 
The active manager may decide to invest heavily in a company that doesn't meet your ethical standards.   That's because the active manager will be looking to see which companies are going to deliver a good return - they do not pause to think whether this is ethically OK, unless they declare otherwise.

With passive investing, you are not avoiding the unethical companies, but you are not actively investing extra money in them either - in order to make more money.    It's a compromise until we get to the day when we can easily mix & match our own KiwiSaver investment decisions online.

Whether this is enough of a compromise depends on You.