The KiwiSaver scheme Kiwibank promotes has been investing in a company that provided munitions to the Saudi military while it was involved in the war in Yemen.
However Kiwi Wealth won't put the company - Raytheon Technologies - on its exclusion list.
The Green Party is calling for greater transparency so New Zealanders know where their savings are invested.
The UN have said that there are five million people in Yemen "one step away from famine", with more than 230,000 Yemenis thought to have died in the war. A UN group of experts on Yemen also said there were "no clean hands" within the warring parties, urging outside states to cease transferring arms to the parties at war.
According to Business Insider, Saudi Arabia accounts for five per cent of Raytheon's sales. The US company makes missiles.
New Zealand's involvement in the conflict has been put under pressure this month - with 1 NEWS exposing Air NZ's dealings with the Saudi military, while Stuff revealed ANZ would review its KiwiSaver investments in three companies, including Raytheon, that sell weapons or munitions to the Saudi military.
The New Zealand Super Fund also was found to have tens of millions of dollars invested in the same three companies.
Both Kiwibank and Kiwi Wealth are owned by Kiwi Group Holdings - which is owned by NZ Post, the NZ Superannuation Fund and ACC (all Government owned). The Kiwisaver scheme is promoted on the bank's website.
In a statement, a spokesperson said that Kiwi Wealth is committed to responsible investing.
"Following a review of ESG research on Raytheon Technologies and consultation with the third party investment manager, Kiwi Wealth currently has no intention of adding Raytheon Technologies to its investment exclusions list," head of quantitative and responsible investment Steffan Berridge told 1 NEWS.
"While we do have clear and consistent exclusions, in our experience, reactively excluding companies or whole industries from investment portfolios on the basis of market sentiment or trends in the moment is not a particularly powerful tool or a strong driver of actual change.
“To really drive change we’ve found it more effective to increase the focus on being an engaged investor."
When asked if it were comfortable being associated with the investment, Kiwibank said that it distributes Kiwi Wealth’s KiwiSaver product and they would work constructively with Kiwi Wealth on the review.
Both Green Party leaders have their superannuation tied up with Kiwi Wealth, and while their MP Chlöe Swarbrick was quick to dump her KiwiSaver provider ANZ last week after its links to the Saudi military, James Shaw and Marama Davidson aren’t taking the same stand.
This week Shaw said he wanted Kiwi Wealth to divest from Raytheon within a month.
"I am concerned about it," he said. "I understand they are actively pursuing (divesting from Raytheon). What we want is all of those schemes to get out of the weapons trade."
The party is ramping up calls for transparency around KiwiSaver schemes.
"It shouldn’t be up to every individual New Zealander, or indeed an investigative journalist, to unearth this sort of unethical investment – it shouldn’t be happening in the first place," Shaw said.
"The more these stories come out, the more clear it is we need changes to the regulatory system. New Zealanders should be able to trust their banks not to invest in overseas conflict.
"That’s why we were so pleased to be able to change the rules last year that mean from June 2021, default KiwiSavers can’t invest in fossil fuels, or in the worst types of weaponry."
Commerce Minister David Clark said changes made to KiwiSaver default providers enshrine rules prohibiting investments in fossil fuels and illegal weapons, such cluster munitions and anti-personnel landmines.
He said default providers would be required to publish on their websites responsible investment practices. KiwiSaver providers also had to list individual assets, which could be accessed through Sorted Smart Investor.
Treasury said in a statement that according to NZ law, State Owned Enterprises (SOEs) needed to exhibit, 'a sense of social responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so'.
"However, this is a broad overriding principle and there are no current legislative provisions specifically limiting the individual investment decisions of SOEs." Instead, investment policies or exclusions were made by each SOE and its board.
MBIE also said in a statement KiwiSaver providers were expected to be aware of "what is illegal and comply with NZ law generally, and meet their obligations under the Financial Markets Conduct Act in how they invest".
"In addition, new default providers will be required to publish on their websites their responsible investment practices."