Hansard and Journals
Ethical Investment (Crown Financial Institutions) Bill — First Reading
Ethical Investment (Crown Financial Institutions) Bill
GRANT ROBERTSON (Labour—Wellington Central) : I move, That the Ethical Investment (Crown Financial Institutions) Bill be now read a first time. At the appropriate time I hope and intend to move that the bill be considered by the Finance and Expenditure Committee. This bill seeks to ensure that our Crown financial institutions invest the money of New Zealanders in an ethical manner. It does that by amending the relevant legislation for Crown financial institutions, setting forth investment policy criteria consistent with internationally recognised norms and conventions for ethical and socially responsible investment. Although Crown financial institutions do not directly control their investments, this framework will require them to instruct their fund managers to invest according to the criteria described in the bill. I want to stress that the main goal of our Crown financial institutions is and should be to generate healthy returns that can fund our future commitments to accident compensation, superannuation, and other key initiatives. This bill will not change that, nor does it aim to change that. It is quite clear that part of sustainability for a business, or, indeed, for an investment fund, is to be profitable. This bill continues that as a key goal, but it introduces meaningful criteria to guide and instruct those funds to invest in a manner that is ethical and socially responsible.
A bill such as this one will inevitably raise questions about what the word “ethical” means. In the context of this bill, it is defined as being socially responsible and environmentally responsible. UN conventions and treaties in those areas are used to set the parameters of what “ethical” is. Essentially it means that Crown financial institutions will be expected to invest in organisations that maintain good human rights and labour standards, are conscious of their ecological footprint, and are not engaging in activities that are harmful to resources such as water, land, and air. “Ethical” also requires that stakeholders are treated fairly, and that the organisation maintains good governance, finance, ethical integrity, and transparency. I take the opportunity to commend the investment policies that our Crown financial institutions have already implemented.
At the same time I pay tribute to my colleague Maryan Street. She conceived this bill at a time when Crown financial institutions had no policies and had taken no action regarding their responsibility to invest, as the law currently has it, in a way that does not prejudice New Zealand’s international reputation. Maryan Street, in her role as the Minister for ACC, worked hard with the Accident Compensation Corporation (ACC) to improve its investment policies, and since then a number of other actions have been taken. In particular, the New Zealand Superannuation Fund has excluded investment in certain activities, such as whaling, some nuclear weapons, and landmine manufacturers. It has also engaged with companies using the UN criteria for socially responsible investment, and all of our Crown financial institutions have discontinued their investments in tobacco. Policies such as those should be encouraged and supported. Furthermore, their existence demonstrates that New Zealanders and Crown financial institutions recognise the importance of ethical investment, and are willing to act to implement it practically. However, they do not indicate that nothing else needs to be done, nor should they be seen as an excuse to sit back and fail to consider what else could be done. There are several reasons, I believe, why changes are desirable. Having in our legislation a commitment to avoiding damage to New Zealand’s reputation is a defensive position, in my view, in terms of ethical investment. Parliament should be acting not only to back up the ethical investment policies we already see from our Crown financial institutions, but also to extend them in a positive manner.
This bill would establish Crown financial institution ethical investment criteria as law, not relying simply on whether the guardians of the Superannuation Fund, at a particular time, believe ethical investment is a good thing, or whether a particular Minister wants to encourage it within ACC. It would put that into law, give some consistency across our Crown financial institutions, and extend the policies. It would also demonstrate Parliament’s support for ethical investment. Policies on ethical investment for our Crown financial institutions need streamlining, clarity, and consistency. At present, legislation for all of the Crown financial institutions remains vague and inconsistent when it comes to what ethical investment might actually mean. My bill would remedy that by creating consistent and extended ethical investment criteria across the Crown financial institutions. It would also provide more direct guidance to the managers of the funds, and, importantly, as I said before, that would occur without taking away any of the fund’s decision-making power. The bill also aims to improve accountability and transparency by requiring more adequate reporting of the social and environmental impacts of each Crown financial institution’s investments. Such reporting practices would also bolster each Crown financial institution’s ability to respond to public interest. Although the changes that are being made by the Superannuation Fund and ACC are to be applauded, there are still issues to do with reporting and engagement with the investment managers and companies on how they go about interpreting ethical investment.
The New Zealand people support ethical investment. We saw that when the public opposed the Superannuation Fund’s investments in companies involved in cluster munitions and nuclear weapons. The public sentiment is also backed by civil society groups, which are active in New Zealand in support of Crown financial ethical investment. Such groups include Investment Watch Aotearoa/New Zealand and the Council for Socially Responsible Investment, and I thank them for their support and encouragement on this bill. I have also received support and encouragement from organisations such as Amnesty International and Oxfam, and a much broader group of non-governmental organisations around the world are working hard to encourage that work.
Internationally there is increasing support for ethical investment, and a growing trend amongst both public and private investors to invest ethically. The UN has endorsed ethical investment. The UN Principles for Responsible Investment, which embody an internationally accepted framework for investors to manage environmental, social, and governance issues in a manner consistent with improving long-term returns, has gained widespread support from companies and State financial institutions alike, receiving over 700 signatures. Other countries have adopted ethical investment policies for their State institutions.
A particularly successful example is the Norwegian pension fund, the Government Pension Fund - Global. It is the second-largest sovereign wealth fund in the world, with assets of over $400 billion. Its investment decisions must be consistent with a set of ethical guidelines. They are extensive guidelines. For instance, the assets of the fund shall not be invested in companies that themselves, or through entities they control, produce weapons that violate fundamental humanitarian principles, produce tobacco, or sell weapons; people who undertake serious or systemic human rights violations such as murder, torture, the deprivation of liberty, forced labour, the worst forms of child labour, and other child exploitation; serious violations of the rights of individuals in situations of war; severe environmental damage; gross corruption; and other particularly serious violations of fundamental, ethical norms. This fund is able to be successful with those criteria. Another aspect of the Norwegian fund’s operations that I think is useful and is something that we can talk about further if this bill proceeds is the ability for it to establish relationships with companies that the fund invests with, in order to observe their behaviour and to ensure that it is ethical.
It is important that this becomes a positive measure rather than a defensive measure. Companies that are seeing their investments potentially withdrawn will want to know in advance that that is a possibility and potentially change their behaviour. So the Norwegian Council on Ethics is involved in observing the behaviour of individual companies. Meanwhile in Sweden the five largest State-controlled pension funds are required by law to follow environmental and ethical considerations in their investment policies, and to report annually to the Government detailing how they are adhered to. Sweden and Norway are only two examples of States that have adopted ethical investment for their State financial institutions.
These international developments give us food for thought. New Zealanders are justifiably proud of New Zealand’s stance on the world stage in areas such as human rights, the environment, nuclear weapons, cluster munitions, and landmines. Therefore, it makes sense for us as a country to put our values into practice in the way our Crown financial institutions invest public money. It also makes sense for us to avoid the embarrassment of unethical Crown financial investments prejudicing our international relationships. This bill is a tangible means of practising what we preach. It is a tangible means of enhancing New Zealand’s image on the world stage, and proving that we are socially conscious and environmentally sound. I commend the bill to the House.
Grant Robertson: So far you’ve got everything right.
DAVID BENNETT: Well, the next bit the member will love because National will not be supporting the bill. So that is the right bit about it.
We need to look at the policy behind the bill, first of all, before we go into the detail of why we support it or do not support it. The policy behind it is not something that any party in this House will have a particular problem with. The nature of investment is such that countries are very careful about how they invest and also the institutions that invest for them. However, although there is that policy of wanting to be seen as ethical in a sense, this bill is not necessary. It is just an attempt by the Labour Party and by that member to try to get some publicity, which they are definitely very short of.
The nature of investment is that ethical investment happens now, and will happen in the future. I want to go through two reasons why it is happening now. The first is very much the market. If we look at the market effect in investment, companies that have a problem in the way that they conduct their operations are seen very poorly in the market eye. Modern markets are not big investors in companies that do not take an interest in the environment, the community, and the sustainable development of their people and their communities. We have just to look at what is going on in the US at the moment with a large oil company, and see the effect of the market price of that oil company, to give us a reflection of what the market says, as if it does not even think it is investing in an environmentally friendly way, or actually working in an environmentally friendly way.
Why would we as a Parliament need to set these rules in concrete and in motion, when the market is achieving the very things that the member wants to see achieved, by forcing companies and corporates to conduct the affairs of their operations in a way that is seen as suitable in the public eye? In essence, this bill is not even necessary, because the market forces those organisations to act in a way that is respectful of what the public would demand.
Grant Robertson: Leave it to the market?
DAVID BENNETT: But public demands do change. Mr Robertson says to just leave it to the market. He thinks that is a problem. But the point is that public demands have changed, and what was publicly feasible a few years ago may not be publicly feasible in a few more years’ time. So the market develops with public opinion, and it would be very poor of this Parliament to hold public opinion to one level when we could look at public opinion developing even further in the future. Mr Robertson may do the opposite to what he wants to do, by holding investment back to levels that are seen as publicly acceptable now, when in the future we could see the institutions’ investment and the investing companies being respectful of the nature of public opinion at that point in the future.
The other argument as to why this legislation is not required is that there are already established and developed ethical investment policies within our own institutions. If we look at the New Zealand Superannuation Fund we see a very good example of what we are talking about. The Guardians of New Zealand Superannuation are signatories to the United Nations Principles for Responsible Investment, and that provides a framework for shareholders to work together to encourage companies to improve investment analysis on environmental, social, and governance risks. So in this way the Superannuation Fund is already part of the United Nations Principles for Responsible Investment.
The guardians are also signatories to the Carbon Disclosure Project; it requires the secretariat for the world’s largest institutional investor collaboration on business implications of climate change. Basically, when it comes to climate change they are already part of an international organisational project—in this case the Carbon Disclosure Project—providing such a basis in respect of investment for carbon, when we are looking at greenhouse gas emissions, including a risk analysis and comparative data.
The guardians are also a member of the Investor Group on Climate Change—the IGCC. That group is a collaboration of New Zealand and Australian investors who are focusing on the impact of climate change and the financial value of investments. It consists of many institutional investors across New Zealand and Australia, and represents a large sum of money under the control of those companies and investors. We have achieved through current processes the results that this legislation seeks to achieve, and we have also achieved those results through the market process anyway. There is no need for this legislation at this time, so the Government will vote against it accordingly.
Hon MARYAN STREET (Labour) : It gives me great pleasure to rise and speak to the Ethical Investment (Crown Financial Institutions) Bill, and I congratulate my colleague Grant Robertson on bringing it to the floor of the House once again, through a member’s provision.
This small bill requires something that is very simple, and I ask Government members opposite to consider again the position that has just been outlined by the member who has taken his seat. The work is not yet done on ethical investment. The work is not yet done on socially responsible investment. We would have a much safer planet if it were. So the member who has just resumed his seat is quite wrong in every respect.
Here is an opportunity for the five Crown financial institutions—the ones that Parliament and the Government can have some influence over—to make sure that their investments align with ethical standards, which might include proper business methods, proper consideration of natural resources, the non-exploitation of labour, and the prohibition on slave labour or forced labour. That is the stuff that this bill attends to.
I am a little surprised, I have to say, to see in one of the media releases the co-leader of the Green Party Dr Russel Norman being somewhat surprised that this bill has come out of the Labour Party. That demonstrates how little time the man has spent in Parliament. This bill was in the ballot in the last Parliament’s term.
This is a significant change. It is not just business as usual. I draw to the attention of members opposite that 2 or 3 years ago, when I last looked at these figures, $1 in every $8 of US investments was being invested in ethical investments or socially responsible investments. We are now in the era when fishing companies like Sealord in Nelson changes it practices because its customers, like Waitrose, will not take its hoki as it is damaging the seabed.
We are in that era. Customers are saying that they will not buy products that they consider to be purchased, manufactured, garnered, or sold at the expense of the planet. If the customer base has that mentality around it, and one-eighth of US investment money was going into ethical investments a few years ago, it is only a short step from there for a Government that has the courage—and, in this case, a Parliament that has the numbers and the courage—to ensure that Crown institutions that invest money on behalf of the New Zealand taxpayer do it in ways that do not bring New Zealand into disrepute. We should do it in ways that do not make us an irresponsible international citizen and in ways that uphold ethics.
That is what ethical investment is about. It is about making sure that everything that this Parliament and this Government in particular has jurisdiction over is done in a way that is consistent with other Government policy. How can we invest in tobacco companies at the same time that we are having a no-smoking policy or an anti-smoking campaign? We cannot be inconsistent in that way. The same thing applies to cluster munitions. In case members opposite did not know, the Foreign Affairs, Defence and Trade Committee has just passed a cluster munitions treaty that those members opposite supported. The treaty prohibits investment by Crown financial institutions.
Mr DEPUTY SPEAKER: I am sorry to interrupt the honourable member, but her time has expired.
CRAIG FOSS (National—Tukituki) : In talking to the Ethical Investment (Crown Financial Institutions) Bill, I say that Mr Grant Robertson is written up quite well as a future leader. He is a nice man, and he may well win an election one day sometime in the future, but he has let himself down here.
I pick up from the previous speaker’s points. Perhaps this bill is aimed at distancing Dr Cullen from Labour as it is now, or from the superannuation fund that the previous Labour Government set up and the directives for responsible and ethical investment that it put in place, because it is a bit of an insult to those institutions that are already practising, and have written and adhered to, all sorts of various directions in ethical and responsible investment policies. In fact, the New Zealand Superannuation Fund is very proud of its ongoing work and the way it measures its investments and makes sure its investments are looked after.
Sue Moroney: Introduced by Labour.
CRAIG FOSS: Well, Labour, National, whomever—the point is whether the legislation is necessary to replicate something that is already being done. The explanatory note of the bill lists the Government’s five major financial institutions. There is about $45 billion to $50 billion in them.
I note a ministerial direction from the Hon Dr Cullen to the Earthquake Commission in 2001—and this is online; I would not try and table it. I am picking up on reputation issues, as the previous speaker mentioned. Paragraph 4 of that ministerial direction states that the commission must avoid: “prejudice to New Zealand’s reputation as a responsible member of the world community.” The direction refers to best portfolio management and all the financial things, but then point No. 4 in paragraph 7 talks about: “ethical investment for avoiding prejudice to New Zealand’s reputation as a responsible member of the world community;”.
So is it working now or is it not? If those members want to talk about this bill being on the books for a while, it implies the failure of organisations already. In an Accident Compensation Corporation document I have here, I see a whole series on ethical investment. It talks about activities repugnant to the laws of New Zealand and about guiding principles of the—
Grant Robertson: Support the bill, then.
CRAIG FOSS: I am not criticising the fact that it is already there; I am pointing out that it is there, so the need for this bill is redundant.
I see that the New Zealand Superannuation Fund is in the Responsible Investment Association Australasia; it is a founding member. The United Nations Principles for Responsible Investment, the United Nations Global Compact, and the Carbon Disclosure Project are mentioned on page 1. I have here a section on responsible investment from the group that looks after $16 billion-odd of our superannuation. The document goes on to define responsible investment. Further on, it talks about responsible investment policy, meetings obligations, and responsible policies for responsible investment. There is a diagram showing that the fund must engage with those the fund invests in and with to make sure it adheres to responsible and ethical investment, and, low and behold, here is the New Zealand Superannuation Fund’s responsible investment practice. There are about 15 pages on responsible investment right here in this document, which is bigger than this entire bill’s 4 or 5 pages.
This bill is a typical leftie bill. It sounds good and it sounds nice, and it will get a bit of public relations coverage for sure, but in a practical sense it is already being done. Some of it is work in progress, but the five financial institutions that look after the Crown’s financial assets are adhering to responsible, ethical progress and management. If it is already working, why would a member want his first bill to be pulled out of the ballot to replicate what is already being done? Perhaps it is all about job creation in the Public Service, but if we do that and follow this bill through, then we would have to lay off people in these other four or five institutions in order to follow through on the ethical progress. Perhaps the member would like to close the loop for us.
As I said, this bill is quite typical of the left. It sounds nice, and it is very cushy and fuzzy and comfy, but at the end of the day this would cost New Zealand taxpayers. The costs would go up as we would have to take out something the previous Government had already put in place and replace it with this bill. I say to Mr Robertson that it is a nice try, but he could do better next time. Thank you.
Mr DEPUTY SPEAKER: Before I call the next speaker, I remind members that when we are debating a bill on a members’ day and there are 5-minute speeches, the bell goes at 4 minutes with 1 minute to go.
Dr RUSSEL NORMAN (Co-Leader—Green) : I rise to speak on the Ethical Investment (Crown Financial Institutions) Bill. The Green Party will be voting for this bill because the Green Party is a strong supporter of ethical and responsible investment. I think it is important to begin by talking about the rationale behind a bill like this. Fundamentally, there are two basic ideas. The first is the objective to make capital cheaper and more available to businesses that are acting responsibly. So for businesses that are not destroying the planet, and hopefully are trying to make it a better place, we want to make capital cheaper and more available in order to make it easier for them to expand and prosper. For businesses that are acting irresponsibly and destroying the planet, we want to make capital more expensive and less available to them.
There are numerous other ways that we can influence the behaviour of businesses, but one way to do it is through the availability of capital—the cost and easy accessibility of capital. A number of large sovereign funds around the world have adopted responsible investment criteria in order to achieve that.
The second major purpose of ethical investment is about us living in a way that we think is ethical, and investing our savings—whether those are collective savings through the tax system such as the Cullen fund, or our own superannuation funds—in a way that is ethical, and making a living off them in a way that is ethical. Ethical investment is a system-transforming objective to move our economy in a much more sustainable and humane direction, and its objectives relate to what is appropriate ethical behaviour. The bill before us tonight will make a small difference towards that, and, for that reason, we support it.
The Greens have been strong critics of Labour in the past over its approach to responsible investment, so we are very pleased to see this bill. When the Cullen fund was introduced in 2001, my predecessor, Rod Donald, attempted at great length to put responsible investment clauses into the New Zealand Superannuation Fund legislation in order to make the Cullen fund operate in a responsible way. Unfortunately, we were not able to do that, and all we got was a clause stating that the Cullen fund was to avoid prejudice to New Zealand’s reputation as a responsible member of the world community. That resulted in the fund investing in whale meat, in cluster bombs—in fact, the Cullen fund quite liked cluster bombs; it was very much into them—and in companies deeply involved in human rights violations, labour rights violations, severe environmental damage, and nuclear weapons systems. The Cullen fund had some very modest direction on responsible investment, but its direction was so weak that it proceeded to invest in all sorts of things that most of us would find reprehensible—although obviously not all of us in the House. The problem with the original Cullen fund legislation was that although we tried to put in a responsible investment clause, we were blocked at that stage. In spite of Rod Donald’s best efforts to put a responsible investment clause into the legislation, the fund went off and started investing in all sorts of things.
The fund is still invested in all sorts of reprehensible things even today, in spite of the Green Party campaigning outside of the legislative framework to stop the fund investing in numerous things. We managed to stop the fund investing in whale meat, tobacco, and cluster bombs, which is a great thing, but it is still invested in, for example, BAE Systems and United Technologies Corporation, which make nuclear weapons delivery systems. The fund is still invested in Halliburton, which, of course, is a profiteer from the Iraq war. It is still invested in Rio Tinto and Freeport-McMoRan, which are causing massive environmental damage, and it is still invested in Wal-Mart, which has very poor working conditions and is renowned for its union busting. Those companies, with the exception of Halliburton, have been ruled out by the Norway Pension Fund. The Norway Pension Fund is the second-biggest sovereign fund in the world. All the oil profits that go into that fund are invested in a way that is ethical. It has ethical criteria, which means that it has pulled out of investing in lots of firms that our Superannuation Fund is invested in.
For those reasons, we support this bill as it makes modest progress towards cleaning up the sovereign funds so that they behave in a way, and invest in companies in a way, that is helpful to our future, rather than detrimental.
HONE HARAWIRA (Māori Party—Te Tai Tokerau) : Tēnā tātou katoa. It is amazing that what goes around comes around, and in this case that some seriously dodgy investments made by Crown financial institutions under the Labour Government, and rigorously defended by it when challenged, are now coming under fire from—surprise, surprise—Labour now that it is in Opposition. Only a few years back the Labour Government provoked a frenzy of condemnation from the press gallery and political pundits alike when it was revealed that the Superannuation Fund was linked to companies that invested in cluster munitions and nuclear weapons production. The Superannuation Fund is just one of this Government’s five Crown financial institutions, all of which have that nice ring of being sound, conservative, socially responsible investment options—but apparently that is not so. The Superannuation Fund was mentioned earlier by David Bennett as being run by a Crown entity called the Guardians of New Zealand Superannuation, which has had investments in whaling, anti-personnel landmines, the tobacco industry, and cluster munitions, for God’s sake. To its credit, though, that entity has dumped its tobacco stocks, based on the set of international guidelines on environmental, social, and governance issues. Indeed, the Māori Party agrees wholeheartedly with the proposal of this Ethical Investment (Crown Financial Institutions) Bill, which is that all five Crown financial institutions sign up to a commitment on ethical investment, based on socially responsible and environmentally sustainable development.
The guardians’ decision to dump its tobacco investment explains perfectly why we support this bill so strongly. Everyone knows that the Māori Party has been a key driver behind setting up the Māori Affairs Committee inquiry into the tobacco industry. Tobacco is directly responsible for the deaths of about 5,000 New Zealanders every year, more than 600 of whom are Māori. It is responsible for billions upon billions of dollars of indirect cost to this country every single year, through health costs and the loss of productivity.
A few weeks back, thanks to the support of Action on Smoking and Health, we had the honour of having Dr Jeffrey Wigand come before our inquiry. Dr Wigand, as people will know, was played by our Academy Award winner Russell Crowe in a memorable movie called The Insider, a story about Dr Wigand’s time of working within the tobacco industry and becoming a key witness against that industry in multibillion-dollar court cases all across the United States of America. Dr Wigand told us heaps of stuff, including the facts that the tobacco industry had solid data on which to base its cigarette sales to different ethnic groups, that its lawyers rewrote tobacco company reports to make cigarettes look safe, that flavouring was added to make cigarettes taste nice, that chemicals were added to make the nicotine addiction work faster, and that tobacco companies specifically targeted young people to replace the older consumers who had died off from tobacco diseases. That is what I mean when I say that the tobacco industry is an example of the kinds of unethical investment we are all well rid of.
Mark Peck, a former Labour MP who was never able to get any real action on stopping tobacco, has gone on to become the director of the Smokefree Coalition. He said something that I really agree with: “There is nothing good about the tobacco industry. It has lied about the harm its product causes to smokers, lied about the addictiveness of tobacco products, and lied about the harm caused by second-hand smoke. Because of these lies, millions of people have died.”
The Māori Party welcomes this new resolve from Labour to set some benchmarks in making it morally untenable for taxpayer funds to be invested in projects that are neither socially responsible nor environmentally sustainable. We are happy to support this bill. Kia ora.
STUART NASH (Labour) : I stand in support of my colleague Grant Robertson’s bill, the Ethical Investment (Crown Financial Institutions) Bill, for three reasons. The first reason is that New Zealanders need to be assured that the Crown, on our behalf, is putting our money in investments that meet our clear test of what we believe is right. The second reason is that New Zealand markets itself globally as a clean, green, 100 percent pure country. If we are to be true to this branding, then we need to be sure that we walk the walk in every sphere of what we do on the global stage. Ethical investment is a large part of this branding. The third reason why this is important is that there is no legislative framework in place to ensure that the agents acting on our behalf actually follow the guidelines and principles expected by all New Zealanders.
Firstly, again, the Crown, through five existing Crown financial institutions, invests huge sums of New Zealanders’ money, gathered through taxation and many forms of investment, right across the globe. I suspect that many Kiwis would be most displeased if they were to find out that agents acting on our behalf were investing in industries and organisations that go against everything that we as proud New Zealanders stand for. Secondly, we market our wonderful country as clean, green, and 100 percent pure. We declared ourselves nuclear-free before it was trendy to do so. We stood up to the world’s biggest superpower and said no. It was a principled stance based on what we believed was right for the people of New Zealand. We fail ourselves if we do not continue to act in such a noble and practical manner. Therefore we need to be able to walk the walk when it comes to our actions as a global investor. We will not be able to articulate a vision on the international stage when we ourselves are seen to be investing in industries that forge the tools of war and death, are involved in activities that directly cause environmental degradation, and engage in activities of human abuse. Therefore this legislation is important in mitigating this global risk to our country’s brand.
The third reason I support this bill is that there is no legislation in place to ensure that agents acting on our behalf behave in an ethical way. Most of our Crown financial institutes have already made commitments to ethical investment through recognition of the United Nations Global Compact, which stipulates 10 ethical, human rights, labour, environment, and anti-corruption principles for businesses to abide by. The Accident Compensation Corporation, the Superannuation Fund, and the Earthquake Commission are all signatories to the United Nations Principles for Responsible Investment, which give guidelines for investment that is socially and environmentally responsible. In fact, section 58(2)(c) of the New Zealand Superannuation and Retirement Income Act 2001, the New Zealand Superannuation Fund’s governing legislation, requires the fund to manage its investment “avoiding prejudice to New Zealand’s reputation as a responsible member of the world community.” This bill will introduce the framework needed to actually implement these commitments fully. Without this legislation, they are little more than empty lines on a page.
In conclusion, there are three reasons why I urge this House to support the bill. First, New Zealanders need to be assured that the Crown on our behalf is putting our money in investments that meet our clear test of what we as New Zealanders believe is right. Second, New Zealand markets itself globally as clean, green, “100% Pure New Zealand”. If we are to be true to this branding, then we need to be sure that we walk the walk. Ethical investment is a large part of this branding. The third reason this bill is important is that at the moment no legislative framework is in place to ensure that agents acting on our behalf actually follow the guidelines expected by all New Zealanders. This is great legislation, and I commend it to the House. Thank you.
AARON GILMORE (National) : It would be great to sit here and hear the previous speaker, Stuart Nash, talk about the issues around ethical and social investment, if he did not take so seriously the fire engine he drives around Napier every week, as I understand it. I will talk a little bit about why the Ethical Investment (Crown Financial Institutions) Bill is not necessary. Capital markets theory talks about the importance of diversification and the importance of investing in very broad and wide-ranging things. I commend the member Mr Robertson for actually coming up with some of these ideas. I think he has thought about an angle that he thought might make some sense.
Unfortunately, there are a whole lot of issues in this bill, some of which are currently taken into account. Some flaws in this bill would actually cause some problems. I will talk about that, but first I want to talk about some of the issues around why this bill is not needed. You see, a former Labour Party Deputy Prime Minister, the previous Minister of Finance, Mr Cullen—
Stuart Nash: Dr Cullen.
AARON GILMORE: Dr Cullen. He was concerned about the nature of investment of our Crown financial institutions, so he would turn round and put forward certain directives to some of them for various reasons. For example, he put a directive to the Earthquake Commission about how it should invest its natural disaster fund with best practice portfolio management, maximising return without undue risk and avoiding undue damage to the reputation of New Zealand as a responsible member of the world community. That basically means exactly what this bill is designed to do. A directive is already in place for the Earthquake Commission to do what this bill essentially says. It is a waste of our time.
Equally, there is a particular problem with some of the definitions in the bill. What is “ethical investment”? What is “socially responsible”? What is “environmentally sustainable”? There are a lot of issues around those definitions. What might have been completely appropriate 12 months ago might not be today. For example, BP, whose branding is “Beyond Petroleum”, might have been seen as a great place to invest a year ago, whereas today it is a social pariah. That has led to a massive drop in its share price.
One of the other issues is that we have seen the Accident Compensation Corporation, which has one of the most active management portfolios that exists with the Crown, put in place some very tight rules about where it should and should not invest its money. For example, it has recently, in the last year or two, got out of a number of investments that it considered to be inappropriate. It exited from investing in a company called Lockheed Martin because it was involved in nuclear explosive devices and it was deemed inappropriate for a Crown operation in New Zealand to have investments in a business like that. But there is a very fine line between what is Lockheed Martin and what is, say, Boeing. Over half of Boeing’s investment, for example, is taken into account by the defence sector. Is that appropriate or not?
Dr Russel Norman: No.
AARON GILMORE: Exactly. Mr Norman would say that it is not appropriate; other Governments and other members would say that it is appropriate. A whole lot of problems and issues exist in some of the definitions in this bill; what they may or may not mean has not been thought through. I actually think that that is a sensible thing to think about. Maybe the member should think more about some of the details, and work with the directors to get this put in place.
The bill puts in place some ideas about some of those definitions, about international conventions and things like that. Again, I commend the member for that, but at what stage would this actually happen? For example, would we invest in oil companies and extractive industries? In New Zealand those industries have seen some of the fastest-growing returns to New Zealand. A company that I am on record as being a shareholder in has increased about 400 percent in the last 5 years. The belief that that rules out certain types of investment is problematic for our good, hard-working Kiwi mums and dads, who are worried about their investments in Crown enterprises. They would actually lose 1 or 2 percent of their returns if this bill got tightened to an extent where those definitions were far too tight.
I like some of the issues that Mr Norman pointed out about the Norwegian sovereign wealth fund. I think it is a good fund and has some merit, but its money came from what some would call socially irresponsible investment. It got its money from mining—in particular, oilfields. In this day and age that is seen as not necessarily a good place to have one’s money. So if we rule out those sorts of things, we would be in a position where we would make New Zealand poorer—for whatever reasons. I think it is great that the member has had this bill pulled out of the ballot; I have not had the great luck to have that happen yet. I commend the member for actually having some of these ideas come through.
Grant Robertson: Do you have a bill in the ballot?
AARON GILMORE: My bill has been in the ballot for nearly 2 years, I say to Mr Robertson, but we will not talk about that. I believe that this bill is superfluous. It takes into account a situation that we are talking into account anyway.
Hon DAVID CUNLIFFE (Labour—New Lynn) : I rise to take a call in support of the Ethical Investment (Crown Financial Institutions) Bill. In so doing, I commend its proponent, Grant Robertson, for this excellent initiative. Billions of dollars are invested in the Crown’s financial institutions. They are an important part of the Government’s asset book, and they are determinants of corporate behaviour in many sectors of our financial markets. It is absolutely appropriate and, indeed, necessary from a fiduciary duty point of view that the boards of those Crown financial institutions, such as Guardians of New Zealand Superannuation, have clarity and legislative protection of their mandate.
Let us put the counterfactual if one did not do that. I ask members to take National’s argument at face value—if they can bear it—which is that the market will provide. That argument is straight out of 1950s ideology. It is actually asking people who have fiduciary responsibilities to shareholders to break their duties in order to suboptimise their return on investment to informally satisfy, potentially, some ethical or sustainability criteria. I will say that again. National argues that if one invests in a green share and it is earning less than an oil company or an armaments manufacturer, then that is OK because the market will provide.
Mr Deputy Speaker, you know, I know, they know, and the public knows that that is arrant rubbish—arrant rubbish. Directors have a legal responsibility to their shareholders. The guardians of the Superannuation Fund have a legal responsibility to the Crown. We owe it to those directors, and to taxpayers, to make those obligations crystal clear in law. That is what this bill does.
This bill goes only a small step beyond the existing requirement on the guardians of the Superannuation Fund, which is that they exercise good corporate citizenship and do not to bring the Government of New Zealand into disrepute. But that requirement gives the guardians a hard job, because it does not define what that means in practice. This bill assists them by bringing more clarity to the question.
In advancing that argument, I will briefly note the important and ongoing role of the Council for Socially Responsible Investment, which has been a continuous and sensible proponent of progress in this area. I also acknowledge Sustainable Aotearoa New Zealand, the Sustainable Business Network, the Business Council for Sustainable Development, and a whole range of other entities. There is also the 100 percent plan, which the Government has turned a blind eye to. I acknowledge all of those groups that have been pushing in this direction.
I particularly single out one individual, Dr Robert Howell, who has been a longstanding advocate on these matters. When I was a brand-new backbencher on the Government side, he helped me with a member’s bill on triple bottom line reporting for Crown entities. My bill did not get as far as this bill has, so I am really proud of the work that Grant Robertson is doing here.
This bill is a sensible and legally necessary step forward—a legally necessary step forward—if we are to uphold New Zealand’s international brand image as an environmentally sustainable, peaceful, and just beacon of hope in a world that is getting worse and worse to live in with every passing year. But the point is that we cannot informally put an expectation on directors bound by fiduciary responsibilities; we need to give them clarity. We need to protect them from second-guessing, and the Crown owes it to boards to pass this bill.
GRANT ROBERTSON (Labour—Wellington Central) : I thank all colleagues who have contributed to the debate on the Ethical Investment (Crown Financial Institutions) Bill. I particularly thank the Green and Māori Parties for their support for the bill. I recognise that my colleague Dr Norman was perhaps concerned about the lack of progress on this issue under the previous Labour Government. I think it is important to note that this bill was proposed and put into the ballot by Maryan Street during the last Parliament. It is an issue that Labour feels strongly about. I acknowledge that as a person who was not part of the previous Government, I come in here with a fresh look at these matters. I think that it is extremely important that this bill has had the opportunity to be heard today.
I also acknowledge the comments that Hone Harawira made about the role of the Māori Party on the issue of tobacco; I think that that has been an important leadership role. It highlights the fact that there is nothing in law today that would stop the Superannuation Fund going backwards on that decision. Nothing would actually stop it from doing that. That is why we need to move beyond minimums.
It is sad for me that National members on the other side of the House see everything in the sense of minimums. Where is the ambition for New Zealand that we heard so much about? Where is the ambition to get out there on the front foot and say that a bill like this is good for New Zealand? It is good for our reputation internationally; it reinforces everything we try to say on the world stage about New Zealand. It does not just rely on minimums and on the fact that some good things have happened in terms of investment. This bill is trying to say that we can actually be proactive. We do not have to be defensive, and we do not have to be passive about our commitment to sustainability and our commitment to human rights; we can actually be active on the world stage and promote what we believe in, not only because we think it is good for the planet today but because we believe in making positive change on those matters.
We can look to historical events like the decline of apartheid in South Africa, and ask what role sanctions played in that. What was the role of the fact that people pulled investment out—
Dr Russel Norman: What was the role of the National Party in that?
GRANT ROBERTSON: Exactly. I say to Dr Norman that that is true. We can look to that and say that it was an opportunity for people all around the world to contribute to making social change happen. That possibility stands again if people are prepared to back this bill.
National’s main argument against this bill is that the market will provide—the market will provide. Well, that is simply not true, because investment procedures could change overnight without the kind of legislative protection that is in this bill. It is a defensive, negative position from National, which simply follows along with the tyre-kicking style of the Government. Mr Joyce likes to influence us with the view that they will go along with where public opinion is; they are not too interested in showing any leadership. But I say that this is the opportunity to show leadership.
The already established ethical investment principles—such as those of the UN, which the Superannuation Fund follows—are good and useful, and they set a benchmark. But it is interesting to note that companies that are particularly focused on ethical investment questions, like HSBC, have moved to develop their own guidelines about things like climate change, specifically because they do not believe that the UN principles go far enough. That is what this bill is trying to do. Let us move away from a passive stance on ethics and sustainability to a more positive one. New Zealand could use that stance to our advantage globally rather than sitting back and saying that we will put into law a clause that says these investment funds simply must not do anything that is prejudicial to our reputation. Instead, we should go out and try to enhance our reputation.
In conclusion, I thank all those organisations that have supported this bill and these issues; I am sure they will go on supporting them. I also mention Dr Robert Howell. I thank my intern Hannah Blumhardt, who has done a significant amount of work in helping to develop Labour’s position in relation to both this issue and the speeches that have been given here today.
New Zealand has an opportunity to be a leading global citizen, to make real the statements we often make about punching above our weight, and to ensure that our investment funds invest in companies that are ethical, sustainable, and positive for the planet. I urge National members to support this bill and take it to a select committee. The bill is not perfect, but it takes us steps forward in New Zealand’s ethical investment, and in our reputation on the world stage.
|Ayes 58||New Zealand Labour 42; Green Party 9; Māori Party 5; Progressive 1; United Future 1.|
|Noes 63||New Zealand National 58; ACT New Zealand 5.|
|Motion not agreed to.|