The NZSF grows a conscience

Earlier in the year, the Listener's Matt Nippert revealed that the New Zealand Superannuation Fund was a dirty investor, with almost 10% of its stock holdings held in companies whose business activities were directly at odds with government policy. The NZSF was investing in nuclear weapons, big oil, gambling, private prisons, torture, genocide, and the rape of Iraq - and they were doing it all in our name.

In response, the NZSF promised to develop a responsible investment framework to ensure their investment decisions conform to basic ethical standards. One of their first decisions has been released today, and as a result, the NZSF will be divesting itself of NZ$37.6 million in tobacco industry stocks. I wonder if Nippert can claim a commission?

The background information [PDF] they've released reads like a press release from ASH. Tobacco is legal, but the industry violates basic standards of business ethics and product safety. In addition,

Investment in tobacco stocks is inconsistent with New Zealand’s international commitments, national legislation, and Crown actions – in particular the objectives of the World Health Organisation (WHO) Framework Convention on Tobacco Control (FCTC) and its extensive focus on the tobacco industry

So, they're bailing out, and as a result the pensions of those who make it to 65 won't be funded by the deaths of those who didn't due to lung cancer. It's a good decision, and hopefully they'll make the same one on nuclear weapons and Halliburton.

NZSF supports oppression in Burma

Back in February, we learned that the New Zealand Superannuation Fund was investing in companies that manufacture nuclear weapons. Today, we learn that they're also investing in oppression in Burma. The Dominion-Post reports that the fund has admitted having investments in Total Oil named by the Burma Campaign UK as "the main supporter of the Burmese military regime":

TOTAL Oil is the fourth largest oil company in the world and one of the biggest foreign investors in Burma. Its joint venture with Burma’s dictatorship earns the military regime hundreds of millions of dollars every year.

Widespread systematic human rights abuses have been associated with the TOTAL pipeline, including forced labour, torture and rape.

Based on the latter alone, this is not a company anyone should be investing in, if only for the naked financial reason that one day they will be sued by one of their victims in a US court and bankrupted. And it is certainly not a company the New Zealand government (which remember "stand[s] up for the rule of law and the human rights upheld by the United Nations") should be goign near.

The NZSF also admits to investing in China's Sinopec and Malaysia's Petronas, but its worse than that. Comparing their 2006 equity portfolio to the Burma Campaign's dirty list turns up quite a list:

Company	Investment
Alcatel	$521,984
Baker-Hughes	$870,674
BJ Services	$9,750,411
Chevron	$12,753,174
DBS Group Holdings	$956,721
GAIL India	$856,567
Hutchison Whampoa	$1,316,554
Ivanhoe Mines	$56,320
Keppel Co	$350,414
Kajima	$278,641
Marubeni	$4,512,730
Mitsui	$4,309,373
Mitsui Sumitomo Insurance	$2,326,065
Nippon Oil	$2,650,055
OCBC	$699,087
Rolls Royce	$537,715
Siemens	$1,637,570
Sompo Japan	$1,720,446
Sumitomo	$3,569,711
Sumitomo Mitsui Financial	$12,160,830
Suzuki	$177,421
Taisei	$269,680
United Overseas Bank	$759,904

That's $63 million of our money which is helping to prop up the Burmese regime.

Not investing in companies which torture and not investing in Burma are two fundamentals of any ethical investment policy. But clearly, our superannuation fund doesn't give a shit.

Yet more unethical investing

I'd avoided reading the Listener this week because of the picture of Princess Diana on the cover. But in amongst the lifestyle crap, including an inane piece on a reader's poll from six years ago, there is a serious piece by Matt Nippert following up on his earlier expose of unethical (and possibly illegal) investments by Crown Financial Institutions. It seems the government had invested $14 milion of taxpayer's money in British arms manufacturer BAE Systems. I say "had" because it's probably worth a lot less now, given that the share price dropped 11% on the news that they were being investigated by the US Justice Department for the same corrupt deals that Tony Blair deliberately turned a blind eye to "in the national interest". But despite the fact that it is now the subject of two separate investigations on both sides of the Atlantic, the New Zealand Superannuation Fund is not considering divesting from this corrupt corporation. Which really does beg the question: just how vile and criminal does a business have to be before the NZSF will refuse to taint our money with it?

Unfortunately, the NZSF refuses to say (though looking at their existing investments - tobacco companies, gambling, arms dealers, Halliburton, oil companies with poor human rights records, oh, and companies which support genocide in Sudan - you have to wonder whether they have any restrictions at all, or whether it's just "fuck the morals, does it make any money"). The good news, apparently, is that they're working on it, and will have some guidelines by the end of the year. The sooner the better, IMHO.

Doing something about the super fund

Last month we learned that the New Zealand Superannuation Fund was investing our money in nuclear weapons, cluster bombs, and genocide. Now the Greens have started a petition to end this practice, and oblige the fund to invest in a socially and environmentally responsible manner. You can download a copy here [PDF]. While Parliament has a poor record on petitions (something I may be posting about in the near future), there is a bill in the ballot to require this, and this petition would be a strong show of support for it to be adopted as formal government policy.

The Cullen Fund and the CDP

Last year, I wrote to the Minister of Finance Michael Cullen asking him to direct the New Zealand Superannuation Fund to sign up for the Carbon Disclosure Project - a project which uses the leverage of large institutional shareholders to force companies to publicise and think about their greenhouse gas emissions. The response was not encouraging - however reading Matt Nippert's Listener piece about the Fund's dirty investments, it seems there has been a change of heart:

The Fund’s approach is generally not one of exclusion, says O’Connor. “It’s not really a divestment policy, it’s much more an engagement policy.” She points to the recent decision by the Super Fund to join the Carbon Disclosure Project – an initiative to encourage companies to report on their greenhouse-gas emissions and the risks they face from global warming – as an example of this approach.

So, it's not all bad news, it seems. Now, if only Cullen can get Air New Zealand to do the same thing...

More unethical investing

On Friday, we learned that the New Zealand Superannuation Fund invests in companies that manufacture nuclear weapons. But its worse, much worse. In this week's Listener, Matt Nippert details exactly what our tax money is being invested in - and the results are very dirty indeed. $230 million - almost 10% of the amount directly invested in stocks - is invested in companies whose actions are directly at odds with government policy. We invest in tobacco companies. We invest in casinos. We invest in arms companies and uranium mines. We invest in Big Oil. And we invest in genocide:

Holdings totalling $12.4 million in five companies blacklisted by Columbia University's Endowment Fund because of their role in propping up Sudan’s government. Sudan’s Janjaweed militia have committed genocide during a conflict that has led to more than 200,000 deaths in Darfur.

Yet another example of New Zealand being "a strong supporter of human rights", I suppose.

And if that's not enough, just to add insult to injury, we also invest in Halliburton. $10.7 million in the US's biggest military contractor in Iraq, which helped to build the American gulag in Guantanamo Bay, and which is part owned by US Vice President Dick Cheney. So, we're in business with the one of the chief architects of the Iraq war, and directly profiting from it and the US's global policy of rendition and indefinite detention without trial. Nice.

Some of these investments may be illegal. I'm not sure that investing in BAE and Northrop Grumman violates s5 (2) (b) of the New Zealand Nuclear Free Zone, Disarmament, and Arms Control Act 1987 as the Greens allege, but it certainly violates s58 (2) (c) of the New Zealand Superannuation and Retirement Income Act 2001, which requires the Fund to invest in such a way as to

[avoid] prejudice to New Zealand's reputation as a responsible member of the world community.

Many of the other investments fall under the same clause. "Responsible members of the world community" don't support genocide, cluster bombs, gross environmental degradation, or Iraq. But more generally, this is our taxes being invested in this, and I think most of us will be disgusted to learn what it is supporting. It's not good enough to just shrug our shoulders and call it a business decision, when our money is helping to build Guantanamo, or to keep the Sudanese regime in power, thereby aiding and abetting its campaign of genocide in Darfur. It's time we subjected our investments to some proper ethical standards. We should not be supporting our pensioners with blood money.

An unethical investment

Twenty years ago, New Zealand took a stand on the world stage against nuclear weapons by declaring itself nuclear free. But today, our government profits from the design and manufacture of nuclear weapons. That profit comes from the New Zealand Superannuation Fund's investments in several high-profile arms manufacturers involved in the nuclear industry. It is unethical and hypocritical - and contrary to the NZSF's own investment guidelines.

The first two go without saying. Nuclear weapons are an abomination and their use a violation of international law. New Zealand has taken a strong stance in support of nuclear disarmament, and so it is utterly hypocritical to be profiting from the manufacture of such weapons at the same time. As for the latter, the New Zealand Superannuation Fund is a party to the UN Principles for Responsible Investment, and has adopted the United Nations Global Compact principles as its benchmark for investment standards. But as the Greens point out, the Norwegian Pension Fund uses exactly the same standards - and interprets them rather more robustly as banning investment in companies involved in the manufacture of nuclear weapons. But it's not just a matter of different interpretations of international standards: s58 (2) (c) of the New Zealand Superannuation and Retirement Income Act 2001, the NZSF's governing legislation, requires the fund to manage its investments so as to

[avoid] prejudice to New Zealand's reputation as a responsible member of the world community.

It is difficult to see how investing in nuclear weapons manufacture when the government has taken such a strong international position against it meets that goal.

But that's not all. The fund's ethical investment guidelines forbid investing in entities engaged in activities contrary to New Zealand law. The Manufacture of nuclear weapons is illegal under the New Zealand Nuclear Free Zone, Disarmament, and Arms Control Act 1987. By its most basic standard, the NZSF should not be putting our money with the bomb-makers.

The amounts involved are small compared to the overall size of the fund - $28.7 million vs $11.2 billion - but it is still wrong, and the NZSF should not be doing it. The Minister of Finance should exercise his duties as controlling Minister to ensure that the NZSF conforms to the ethical guidelines it has adopted, rather than investing our money in an immoral industry.

Government snubs Carbon Disclosure Project

Back in September, I blogged about the release of the latest Carbon Disclosure Project - an attempt by major institutional investors to get major companies to disclose information about their greenhouse gas emissions, the risks they faced from climate change, and what steps they were taking to manage those risks and keep their shareholder's money safe. At the time, I noted that New Zealand companies didn't want to talk about climate change - very few had bothered to respond, and only one had made their response public. Also surprising was the fact that government-owned companies such as Air New Zealand had refused to participate, and that the New Zealand Superannuation Fund was not on the list of signatories, and was not using its weight in the New Zealand market to encourage greater disclosure (if only for its own purposes).

So, I wrote to Michael Cullen asking him to use his power as shareholding Minister in Air New Zealand to force that company to participate in future, and to direct the Cullen Fund to sign up for the CDP. Both of these would help send a message to the market that climate change mattered, and that it would affect investment decisions. Today, I received his response:

Thankyou for your letter of 20 September 2006 about the Carbon Disclosure Project (CDP). I appreciate you bringing this initiative to my attention. I agree that the responses of public companies, especially large emitters, to the challenges of addressing climate change will be of increasing importance to many investors. The CDP is anticipating this trend, and I welcome the initiative.

You suggest that I should issue a direction to Air New Zealand and the Guardians of the New Zealand Superannuation Fund to take part in the CDP. I am reluctant to give such directions. The government has important roles in promulgating an increased awareness of climate change in New Zealand, and in developing clear and sustainable climate change policies. Companies and investors that operate in New Zealand should be able to make investment and production decisions that take account of such policies. You will be aware that the government is in the process of consulting the public on refinements and enhancements to New Zealand's climate change policy.

Some companies and investors will be attracted to the information that can be generated through the CDP. However, I would prefer to leave decisions about whether and when companies should participate in such a scheme to the companies themselves. They are best placed to assess the net benefits of such participation. If more transparent disclosure of carbon information proves to be important in attracting capital, no doubt that will be a factor in those decisions.

So, in short, he recognises that the CDP is a valuable exercise in helping investors make long-term decisions, but he is unwilling to use the government's power as an investor either to encourage this trend, or to help ensure our money is kept safe. Instead, he seems to think the market will just magically sort the whole problem out, without any need for the government to show any leadership.

Sometimes, I really do despair...