Gilmore Aaron: Ethical Investment (Crown Financial Institutions) Bill — First Reading 
Gilmore Aaron: Ethical Investment (Crown Financial Institutions) Bill — First Reading 
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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.