Greenwashing: What NZ Investors Should Know

Greenwashing is the practice of making misleading claims about how environmentally or socially responsible a product, company, or investment really is. In the context of New Zealand investing, it refers to fund managers, including KiwiSaver Scheme providers, or even companies marketing financial products as “ethical” or “sustainable” without the rigour to back it up. It can cost you money, and it can mean your savings end up in assets completely at odds with the values you thought you were supporting.

How broken is the current system?

In 2023, S&P Global gave Philip Morris International, the company behind Marlboro cigarettes, an ESG score of 84 out of 100. Tesla, the world’s largest electric vehicle manufacturer, scored 37. If a scoring system can rank a tobacco giant as more than twice as “ethical” as the company doing more than anyone to electrify transport, something has gone sideways.

Greenwashing exists across consumer products too, from eco-friendly cleaning sprays to packaging adorned with meaningless green ticks. This article focuses specifically on how greenwashing affects investment products sold to New Zealand investors, including managed funds and KiwiSaver Schemes, where the financial consequences can compound over decades.

A Brief History of the Green Rinse

The term greenwashing reportedly dates back to the 1960s, when the hotel industry started placing those little cards in rooms asking guests to reuse their towels “for the environment.” The hotels were mostly saving on laundry costs, but the eco-friendly framing stuck. The concept has since expanded to cover everything from corporate marketing campaigns to financial products wrapped in feel-good labels with very little substance underneath.

Why It Matters More Than You Think

Research from Consumer NZ found nearly half of New Zealanders (47%) find it difficult to tell whether environmental claims are truthful. About three-quarters have never checked to see if a green claim is accurate. Most people simply trust what they’re told, which is entirely reasonable, until someone exploits it.

In the investment world, the problem is compounded by a confusing alphabet soup of terminology. You will see funds described as responsible, sustainable, ethical, ESG, impact, or values-based, and each term can mean something different depending on who is using it. Some fund managers exclude entire sectors (say, fossil fuels or gambling). Others invest in those same sectors but argue they are engaging with company leadership to push for better outcomes. Both approaches can legitimately sit under the ethical umbrella, which tells you just how elastic the label has become.

For a deeper look at how ESG investing works and what it means for your portfolio, see our companion piece on ESG investing in New Zealand.

Regulators Are Showing Their Teeth

For years, greenwashing enforcement was mostly bark, and no bite. Regulators issued guidelines, published reports, and gave the occasional stern look. In the last couple of years, real consequences have started arriving.

Greenwashing Across the Tasman

The Australian Securities and Investments Commission (ASIC) has secured three landmark greenwashing penalties through the Federal Court: Mercer Super was fined A$11.3 million, Vanguard Investments Australia was hit with A$12.9 million, and Active Super was ordered to pay A$10.5 million. In every case, the problem was the same: the marketing promised ethical exclusions the fund manager had not actually implemented.

This matters for New Zealand investors more than you might assume. Many KiwiSaver Schemes and managed funds available here are run by Australian-based providers or invest through Australian-domiciled vehicles. When ASIC finds systemic failures in how funds are screened, the implications do not stop at the Tasman.

In New Zealand

The Financial Markets Authority (FMA) censured Pathfinder Asset Management for misleading advertising about its KiwiSaver Scheme. Between 2021 and 2024, Pathfinder ran social media and website advertisements implying its funds completely excluded companies involved in animal testing and fossil fuels. In reality, Pathfinder had granted exceptions for five companies involved in pharmaceutical animal testing and one company generating electricity from fossil fuels. The FMA concluded the advertisements should have disclosed those exceptions prominently.

Separately, Z Energy settled New Zealand’s first climate greenwashing court case in November 2025. Consumer NZ, Lawyers for Climate Action, and the Environmental Law Initiative had taken the fuel company to the High Court over its “Moving with the Times” campaign, which claimed Z was “in the business of getting out of the petrol business.” Z apologised for any confusion but did not admit liability. All parties agreed in their joint statement on a point many would find telling: greenwashing is prevalent in New Zealand and has been subject to some enforcement.

Further Afield

Germany’s DWS, the asset management arm of Deutsche Bank, was fined €25 million for overstating the ESG credentials of its funds. France ordered TotalEnergies to pull misleading carbon neutrality advertising or face daily fines. The direction of travel is clear: regulators globally are moving from warnings to penalties.

How Greenwashing Shows Up in Investment Products

Greenwashing in financial products is rarely as crude as outright lying. It tends to be more subtle, which is precisely what makes it dangerous.

1. ‍Vague labels with no substance. A fund calls itself “sustainable” or “responsible” without specifying what it actually excludes, how it screens, or what criteria it applies. The label creates an impression, but there is nothing concrete behind it.‍
2. Exclusion policies with undisclosed exceptions. This is exactly what caught out Pathfinder and the Australian funds. A fund advertises broad exclusions (no fossil fuels, no weapons, no gambling) but quietly grants exceptions for specific holdings. In KiwiSaver Schemes, this gap is particularly common: the marketing material and website present a clean story, while the detailed exclusions and any exceptions are buried in the Statement of Investment Policy and Objectives (SIPO), which most members never read.‍
3. Marketing claims detached from actual holdings. A fund’s website and advertising may emphasise clean energy, community impact, and environmental stewardship, while the portfolio itself holds conventional assets barely distinguishable from any other balanced fund.‍
4. Ratings systems producing absurd outcomes. ESG scores are generated by private rating agencies using wildly different methodologies. The Philip Morris vs Tesla example is not an outlier. It is a feature of a system in which disclosure quality and corporate governance policies can outweigh the actual environmental harm a company causes.

How to Protect Yourself

You do not need a regulatory background to defend your portfolio against greenwashing. You do need to ask better questions.

1. ‍Ask what the fund actually excludes, and whether exceptions exist. If a fund manager cannot explain their exclusion criteria clearly and concisely, treat it as a warning sign. You can check a fund’s SIPO on the Disclose Register, though it is not the easiest site to navigate. ‍
2. Look beyond the label. “Ethical,” “sustainable,” and “responsible” are not regulated terms in New Zealand. A fund can use them without meeting any particular standard. Most managed funds are required to publish their asset lists on the Disclose Register every six months. Check the underlying holdings against the marketing promises.‍
3. Be sceptical of ESG scores. Different rating agencies can give the same company radically different scores. ESG scores are a starting point for research, not a verdict.‍
4. Ask your adviser. A good financial adviser will do due diligence on the underlying holdings of any fund, rather than relying on labels or marketing brochures. If your adviser cannot tell you exactly what a fund invests in and why, it might be time for a different conversation.

What Good Advice Looks Like

Regardless of where you sit on ethical investing, the role of a financial adviser should be the same: look past the label, examine the holdings, and give you an honest assessment of whether the product does what it claims to do.

At Become Wealth, this is how our advisers approach it. Some clients want their portfolio screened for specific ethical criteria; others want a diversified, evidence-based approach with no particular ethical filter. We work with both. Our advisers research fund options using independent third-party data, scrutinise underlying holdings rather than relying on marketing brochures, and build recommendations around each client’s objectives, values, risk profile, and financial position. We do not sell products. We do not take commissions from fund managers. And we do not confuse a green label with due diligence.

The Bottom Line: Greenwashing in New Zealand

The free ride for vague, unsubstantiated green claims is ending. Across Australia, Europe, and increasingly here in New Zealand, regulators are moving from gentle suggestions to actual penalties. The Pathfinder censure and the Z Energy settlement collectively point in one direction.

What comes next will matter more than what came before. If regulators enforce disclosure expectations consistently, New Zealand investors will finally have a reliable way to distinguish funds delivering on their promises from those just borrowing the vocabulary. Until then, the best protection is the investor who refuses to take a label at face value. Ask what’s in the fund. Ask what the exceptions are. And if the answers are vague, your money probably deserves better company.