Guidance Note

Responsible Investment Disclosure by KiwiSaver Scheme Providers

Introduction

From 1 April 2008, every investment statement for a KiwiSaver scheme or a complying superannuation fund must include a statement about the scheme's approach to responsible investment.

Each KiwiSaver scheme investment statement must state whether or not the scheme takes into account responsible investment in its investment procedures and policies. If responsible investment is taken into account, the provider must have more information available about this for prospective members.

This guidance note aims to help KiwiSaver scheme providers understand this new disclosure obligation so that they can comply with the law, and investors can obtain useful information about the scheme's approach to responsible investment.

The Securities Commission is responsible for the enforcement of securities law. This guidance note sets out the Commission's understanding of the new law, and the approach it intends to take to the new disclosure requirements.

The new responsible investment disclosure will require KiwiSaver providers that do take responsible investment considerations into account to provide extra information in a document that is available to investors. The Commission does not expect that all of the matters suggested in this guidance note will be contained in the initial explanatory material published by all scheme providers. This will be acceptable so long as the information provided contains an accurate explanation of the extent to which responsible investment considerations are taken into account, and the information is not likely to mislead, deceive or confuse investors.

We will expect all schemes who do take responsible investment considerations into account to have full explanatory notes available by 30 September 2008. The Commission intends to review responsible investment disclosures made by KiwiSaver scheme providers late in 2008, and may amend or supplement this guidance note at that time.

This guidance note covers:

In preparing this guidance the Commission has had regard to the Australian Securities and Investments Commission's Regulatory Guide 65, 'ASIC guidelines to product issuers for disclosure about labour standards or environmental, social and ethical considerations in Product Disclosure Statements (PDS)'. Given the level of trans-Tasman operations by many New Zealand funds managers, there are advantages for New Zealand issuers if the guidance about responsible investment is consistent with the equivalent disclosure standards in Australia. However, there are differences in the precise legal requirements in Australia and New Zealand, so scheme providers should take care to be familiar with the New Zealand law.

The legal requirements

From 1 April 2008 all investment statements for a KiwiSaver scheme or a complying superannuation fund must include a statement telling investors whether or not responsible investment is taken into account in the scheme's investment procedures and policies. A complying superannuation fund is a fund that has been approved by the Government Actuary as having met certain criteria similar to KiwiSaver - for example, KiwiSaver lock-in rules, portability etc.

The legal requirement to do this is in Section 205A of the KiwiSaver Act 2006. It sets out two statements, one of which must be included in every investment statement for a KiwiSaver scheme (or a complying superannuation fund).

The statement must be included at the end of the "Who is involved in providing it for me?" section of the investment statement.

Regulation 7A(4) of the Securities Regulations 1983 requires all information, statements, and other matters specified under an italicised question set out in Schedule 3D that are required to be contained in an investment statement in respect of a security to be set out together in the investment statement under that question. Providers may wish to note that investment statements first distributed before 1 April 2008 need not be set out as required by Regulation 7A(4)¹. Instead, providers may, until 31 July 2008, indicate the changes or corrections to investment statements required because of Section 205A of the KiwiSaver Act 2006 by way of an insert or supplement distributed with the investment statement. However, information provided in the inserts or supplements must be set out in a style or format consistent with the investment statement.

Non-compliance with section 205A of the KiwiSaver Act is taken to be non-compliance with the Securities Regulations 1983². This means that the enforcement and liability provisions of the Securities Act 1978 apply to this requirement in the same way that they apply to the rest of the investment statement.

If you offer a KiwiSaver scheme or a complying superannuation fund which takes into account responsible investment (including environmental, social, and governance (ESG) considerations) in its investment policies and procedures, every investment statement for the scheme must contain the following statement:

'Responsible investment, including environmental, social, and governance considerations, is taken into account in the investment policies and procedures of the scheme. You can obtain an explanation of the extent to which responsible investment is taken into account in those policies and procedures -

[if the issuer has a website] on the issuer's website on the Internet at [specify website address], which is publicly accessible at all reasonable times; and

from the issuer, free of charge, upon request.

If you provide a KiwiSaver scheme or a complying superannuation scheme which does not take responsible investment (including ESG considerations) into account in its investment policies and procedures, every investment statement for the scheme must contain the following statement:

'Responsible investment, including environmental, social, and governance considerations, is not taken into account in the investment policies and procedures of the scheme.'

If a scheme does take responsible investment into account, the investment statement must refer investors to an explanation of the extent to which responsible investment is taken into account in those policies and procedures. If the issuer has a website, the explanation must be available on the website, and the investment statement must give the website address. Whether or not the issuer has a website, copies of this explanation must be given to any person, free of charge, on request.

A statement in any document that is referred to in an investment statement is taken to be included in that investment statement for the purposes of the Securities Act. This means that the explanation about responsible investment, which must be referred to in the investment statement of a scheme that does take into account responsible investment, is part of the investment statement for the purposes of securities law. Issuers must take care to ensure that the explanation is not misleading, deceptive or confusing in any respect that is material to the offer of securities.