Rutherford TomTOM RUTHERFORD (National—Bay of Plenty): Wow he's a bit of a silver fox—Mr MacLeod—but I don't pretend to be him one bit. I do sense the irony in having the youngest member of the Government stand and speak on this piece of legislation but I'll do it with—Ingrid Leary: Oh are you talking about me?TOM RUTHERFORD: No no I'm was talking about me—talking about me. But I'll do it with good grace and a lot of detail because it's good to see some bipartisanship across the House—Celia Wade-Brown: More than two.TOM RUTHERFORD: More than two what? Steve Abel: Bipartisan.TOM RUTHERFORD: Oh partisan support across the House. Hey I learnt something—there we go. It's good to see that taking place this evening in support of this bill in the legislation previously led by the previous Government. It was picked up by the Minister of Finance and our Government and is being transitioned through. That's really really pleasing to see. I thought actually before I talk about the purpose of what the bill is aiming to achieve let's talk about the background. Let's talk about why we're here in the first place discussing it and then we'll get into the purpose. Section 59 of the Act currently requires the Guardians of New Zealand Superannuation to use their best endeavours to avoid having the New Zealand Superannuation Fund take a controlling stake in any entity. The original policy rationale for the control restriction was that the New Zealand Superannuation Fund's purpose was to get exposure to investments and not to own businesses. If the Government wished to take ownership of businesses it would have a policy rationale for doing so.Now the New Zealand Superannuation Fund was also still developing its investment practices and when it was set up and established in 2001 by the Labour Government at that time direct controlling investments were uncommon within the global practice of investment management by sovereign wealth funds. Amendments in 2015 partially removed the restriction allowing the Guardians to create and control fund investment vehicles.Now that's the background. That's the context for why this House is today progressing this bill through the second reading with the full support of every party which is very very pleasing to see. The purpose now is that the bill is repealing and replacing current sections 59 to 59B of the Act and the amendments will remove the restriction on the New Zealand Superannuation Fund and allow it to take a controlling stake in entities in the future. The Guardians invest Government contributions into the Superannuation Fund which is a global portfolio of investments that will help pay for the increased cost of universal superannuation payments in the future.Now as the youngest member on the Government benches I can sense the irony about the decision that we're making here today when I'm standing to speak but I can also see why it is so valid that we're making this decision. If I look at my—Dan Bidois: It will pay for your retirement.TOM RUTHERFORD: It is—it will help pay for my retirement. That's a bit of a long way off but yeah we'll see. If I look at my personal electorate of the Bay of Plenty—not Hamilton but the Bay of Plenty electorate—we've got a median age of 40.2 at the moment which is above the national average of 37.4 and 18.5 percent of our population is aged over 65. Often we were tarnished with the brush of being the town for newlyweds and nearly-deads but I would say that we are changing the landscape and we are filling the gaps in between. It is a wonderful community for us to live in and this amendment bill will have wider ramifications for our Bay of Plenty community. As my colleague Catherine Wedd said in her speech earlier from the electorate she's representing in Tukituki—the fruit bowl as she often refers to it—by the late 2050s over a quarter of New Zealand's population will be aged over 65 and that is very stark. It's something we have to consider and we have to prepare for and know that we've got things in place to manage and mitigate it and undertake it.So this bill confirms the allowance for the Guardians to hold a controlling interest in a business. The select committee noted that the bill will allow the Guardians to take a controlling interest in more active operating companies. I looked through the report back from the Finance and Expenditure Committee in August of last year on the New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Bill and when they went out for submissions they received seven from a mix of organisations and individuals. Four submitters gave full or qualified support for the bill while two were opposed and one offered no opinion. The recommendations from the select committee back to the House was that they did not recommend any changes to the bill as introduced on the basis of the submissions they received. Nevertheless some submissions related to key issues that they thought merited further discussion and I thought about this part around benefits and risks of removing the restriction on controlling interests.The select committee in reporting back to the House has said that they understand that the main benefit of removing the restriction on controlling interests would be to allow the Guardians to invest directly in a wider range of investment opportunities in New Zealand where such opportunities are relatively few. It would give the Guardians more flexibility when entering and exiting a holding providing additional capital to investee entities or influencing board and shareholder decisions on for instance ESG matters (environmental social and corporate governance). Removing the restriction would also enable the Guardians to use simpler ownership structures and take fuller advantage of investment opportunities. On the other hand" the select committee noted "one potential risk of this change is that it might compromise the Guardians' independence from public or ministerial pressure." So I wanted to dive into that a little bit deeper to see what the select committee said could be some ways to mitigate that. They said that an example of what might occur could be that "allowing the NZSF to take controlling stakes might lead to pressure to bail out distressed New Zealand companies."The select committee understood "that this risk was considered when the Act was first developed [in 2001] and the following protections were included to mitigate it: Section 58(2) of the Act requires the Guardians to invest the fund on a prudent commercial basis. The Board of the Guardians is responsible for the Fund's performance and for ensuring that the Fund invests in a commercial manner irrespective of ministerial or public pressure." The other part is "Section 64(1) and (2) of the Act provide that the Minister can give only non-binding directions to the Guardians regarding the Government's expectations of the Fund's performance including as to risk and return. Further the Guardians' board is appointed at 'arm's length' from the Minister via nominations from a separate nominating committee with each board member required to have substantial expertise in the management of financial assets."This is a way of mitigating the difference and not having undue pressure from Ministers or anyone else on the Guardians and their board. I think it's really clear that the bill distinguishes between the Guardians as a Crown entity and the Guardians as a manager and administrator of the New Zealand Superannuation Fund. Allowing the Guardians to hold controlling interests will have a limited impact on competition with other market investors because the size and scale of the fund's direct investments differentiates them from the market where there are few domestic investors of this scale. The Guardians provide depth to the market for large capital investments. They are truly long-term investors and can withstand short-term fluctuations in valuation. Removing the control restriction will enable the Superannuation Fund to access a wider group of viable investment partners and opportunities particularly within New Zealand. With the Guardians having a reputation of having world-leading environmental social and governance (ESG) practices it will have a strong commitment to using its influence as a shareholder to encourage companies to integrate ESG into their decision making and to report on their ESG risks. It is a pleasing night to gain support for a bill across this House from every political party. The New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment Bill is receiving the support of this House and I'd like to commend it to the House. Motion agreed to.Bill read a second time."