UPDATE (9.11.23): 

After an internal review, we have decided to immediately divest our holdings in three Israeli banks whom we consider do not meet the requirements of our Responsible Investment Policy with regard to adherence to UN Global Compact Guidelines. 

They are Bank Hapoalim BM, Bank Leumi Le Israel BM, and Mizrahi Tefahot Bank Ltd.

These changes will be reflected in our global share portfolio and subsequently all funds that carried the holdings. 

We are engaging in a further review with Bloomberg of our index screening methodology to ensure this is aligned with our Responsible Investment Policy. 

We’re grateful for all the feedback from our members which help us be a better ethical investor and social enterprise.

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Over recent days, we’ve heard from an increasing number of members, in relation to the rapidly developing situation in the Middle East. We understand that people are trying to do their bit by ensuring their investments are not in any way supporting the conflict.

At Simplicity, we are deeply concerned by the continued conflict in the Gaza Strip, the West Bank, and Israel. We are taking this situation, and the humanitarian impact, very seriously. As an ethical investor it is in our DNA to be 100% transparent on what and how we invest.

We are predominantly a passive investor, so we track indices for most of our investments, including international shares. To implement our Responsible Investment Policy we engage an index provider, Bloomberg, who applies negative screening to exclude companies from the index on the basis of specific business activities (e.g. weapons manufacturing) and/or behaviour (including human right violations). 

As per our Responsibility Investment Policy, our global share portfolio applies an ESG-screened index provided by Bloomberg. Screening is rules-based, and companies’ conduct is assessed on data obtained by Bloomberg from Sustainalytics, an independent ESG research provider.

The Bloomberg screened index excludes companies where Sustainalytics’s research and data indicates that the company is non-compliant with the UN Global Compact guidelines, including:

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses.

The index is reconstituted on a quarterly basis. This process involves sorting, adding, and removing stocks from the index, including companies that no longer meet the index screening rules. As at the most recent Bloomberg index reconstitution in mid-September, the global share portfolio held five investments in companies listed in Israel. None of these companies were excluded under index screening rules.

The next quarterly index reconstitution will be implemented by Bloomberg in December. In the meantime, given the concerns we and our members have regarding the events in the Middle East, we have been in contact with Bloomberg to determine whether any new data has been received from Sustainalytics which may impact the inclusion of any of the companies in question in the screened index. We have made it clear that if new information is provided by Sustainalytics and companies are found to have violated UN Global Compact guidelines, we expect these companies would be excluded from the index as soon as possible. 

By raising questions with Bloomberg, we are hopeful that this will convey a high level of concern, and that Sustainalytics and other ESG data providers will be closely monitoring the situation and identifying any unacceptable conduct in the index screening data they provide, so that this can be reflected in screened indices promptly.

We're also monitoring the NZ government’s position on this conflict. Any local legislation will be applied to our Responsible Investment Policy. We expect any changes to international conventions and law will be reflected in our established index screening methodology. 

As a KiwiSaver and fund manager that has ethics at its core, this situation and our members' concerns, matter to us. We will keep members updated about any further developments. If you have any further questions or comments, please get in touch at info@simplicity.kiwi