Investing in this option

Who is it for?

Growth (Lower Carbon) is intended as an alternative to our current Growth option and is designed for members with a long investment horizon. It will appeal to members interested in a lower carbon investment option with a greater focus on renewable energy.

Why a growth option?

A growth investment strategy is appropriate for a broad cross-section of members – from younger members just starting out on their retirement savings journey to members into their 50s and beyond – depending on their individual circumstances. With New Zealanders living longer and needing to provide a retirement income over 20 years or more, many will choose to have at least some funds invested in a growth option well into retirement. We will look at introducing lower carbon balanced and conservative options if there is sufficient take-up of the new growth option.

Can I combine the new option with the current options to reduce my risk?

Yes, but it’s not ideal. If you were to combine Growth (Lower Carbon) with Cash to reduce your risk/return profile, you may end up with a much higher proportion of your savings invested in cash than you would with the current Balanced and Conservative options. You could choose to combine Growth (Lower Carbon) with Balanced or Conservative. However, that would not be a ‘pure play’ in terms of minimising the carbon footprint of your investment.

There’s one other thing to think about if you choose to mix and match Growth (Lower Carbon) with other options. Because returns from different options would vary, you may also need to monitor your portfolio to make sure that one option does not come to dominate your investments.

Can I combine the new option with UniSteps?

No. UniSteps will continue to use the current Growth, Balanced and Conservative options as 'building blocks' to reduce your allocation to growth assets progressively over time.

How do I switch to the new option?

You can switch some or all of your investments to the new option online from Wednesday 30 April 2025. Log in to your account and choose 'investment options'. Alternatively, from 30 April, a new Change of investment form will be available under documents and forms.

Seek investment advice

Choosing an investment strategy is an important decision. We recommend you seek professional financial advice if you are unsure what to do. The Sorted website has information to help you choose a financial adviser. Go to www.sorted.org [external link] [external link]and search ‘financial advice’.

Exclusions

Is the new option 100% fossil fuel free?

No, the new option will be lower carbon not zero carbon. We have been very careful in naming the fund so as not to be misleading. That said, Growth (Lower Carbon) will be 80% invested in the Russell Investments Sustainable Global Shares ex Fossil Fuels Fund, which aims to reduce exposure to carbon emissions by 60% versus the MSCI ACWI ex-Australia Index and eliminate exposure to fossil fuel reserves.

Growth (Lower Carbon) will be 20% invested in the Russell Investments Global Bond Fund. The Global Bond Fund invests in a range of fixed-income securities issued by international governments, companies and agencies. This fund doesn’t exclude fossil fuels but it does target a carbon footprint that is 20% less than the market index for the corporate debt portion of the fund (it is difficult to measure the carbon footprint of sovereign bonds).

What activities are excluded from Russell Investments’ ex Fossil Fuels Fund?

Specifically, the Russell Investments Sustainable Global Shares ex Fossil Fuels Fund seeks to exclude companies that:

• have fossil fuel reserves
• have significant involvement in fossil fuel-related activities – companies that derive more than 10% of revenue from thermal coal extraction or power generation from coal
• have significant involvement in oil and gas-related activities – companies that derive more than 10% of revenue from oil and gas exploration, production, refining, transportation and/or storage or that are part of these Global Industry Classification Standard subsectors:
  • Integrated oil and gas
  • Coal and consumable fuels
  • Oil and gas drilling
  • Oil and gas exploration and production.

The fund also has exclusions relating to tobacco and armaments similar to the current investment options and consistent with our responsible investment policy.

Performance

This graph compares returns for Growth against simulated returns for Growth (Lower Carbon) over nine years. While, in some years, the returns are quite different, the average return for each option over nine years is reasonably similar. Remember too, that past returns are not necessarily indicative of future returns. We simply don’t know whether the pattern set over the past decade will continue into the next.

We expect the performance of the two options to be similar because they have a similar mix of growth assets (e.g. shares) and income assets (e.g. fixed interest). However, there could be a significant degree of divergence between the options because of differences in the types of growth and income assets they invest in.

The new option isn’t simply the current option stripped of fossil fuel-related investments. There are many other differences between the two options that may also impact on the performance and volatility of each.

Differences between the two options

*Estimated total annual fund charges, including investment and administration fees.

Other information

Hedging

The Russell Investments Sustainable Global Shares ex Fossil Fuels Fund is unhedged. The Russell Investments Global Bond Fund is hedged. Hedging is basically an insurance policy that means investors only have exposure to the underlying asset class returns and minimises the impact of changing currency exchange rates. On the other hand, returns from unhedged investments are enhanced or reduced as relative currency values move up and down.

Fees

Investment fees for the new option will be lower than the current Growth option. The main reason for this is that Growth (Lower Carbon) will be largely passively managed (see ‘Active vs passive’ below).