Norman Russel: New Zealand Superannuation and Retirement Income Amendment Bill — Second ReadingText is incorporated into the Bound VolumeNorman Russel: New Zealand Superannuation and Retirement Income Amendment Bill — Second Reading[Sitting date: 07 May 2015. Volume:705;Page:3326. Text is incorporated into the Bound Volume.]Dr RUSSEL NORMAN (Co-Leader—Green):I rise to speak to this amendment to the New Zealand Superannuation Fund and the legislation that governs it. The New Zealand Superannuation Fund was established by an Act in 2001. That Act was put up by the Labour Government and got the numbers in the House by the Green Party voting for it. So Labour and the Greens provided the numbers; the National Party opposed it. It was far too sensible for the National Party to support. The reason the Greens supported it and allowed the Superannuation Fund to come into existence—because without our votes it would not have come into existence—was that we thought it was important to put money aside at a time when we were running large surpluses in order to pre-fund some of the costs of baby boomers’ superannuation further down the track. It does not pay for all of it—it does not even pay for most of it—but it does deal with some of the costs that are going to come down the track in the 2030s and possibly before then as we deal with some of the retirement costs.It is important to understand that the fund is not here for ever. It is not a permanent sovereign wealth fund nor is it designed like that—although it may end up becoming one. Who knows what future parliaments will decide? But it was meant to prepay some of the cost. That is why Michael Cullen put it up and that is why the Greens gave the necessary votes for it to come into existence. We were very supportive of the arm’s-length operation of the fund. We negotiated at the time for a clause within the bill whereby the Superannuation Fund—it was a kind of a responsible investment clause basically—could not operate in a way that would damage New Zealand’s international reputation. That was the compromise that was reached at the time between us in the Green Party and Michael Cullen. We wanted a stronger responsible investment clause in the Superannuation Fund. If you look at the Norwegian fund for example—the world’s biggest sovereign wealth fund at US$1 trillion—it has a much stronger responsible investment clause in it. But Michael Cullen would not accept as strong a responsible investment clause as we wanted so that is how we came up with a compromise. For us that was the kind of parliamentary direction under which the fund should operate.I think that the fund has tried to work within a responsible investment framework. There have been a number of times when we have raised issues about the fund’s investments. Over time the fund has pulled out of a series of investments—for example cluster munitions which are small bomblets designed to target children. We got the fund to pull out of those. We are very pleased about that. Of course the next battle is going to be about fossil fuels. That will be the next thing that the fund pulls out of as leading financial institutions all around the world move away from fossil fuels.In terms of interference in the fund the main interference in the fund has been by this National Government by its giving a direction to the fund that a certain percentage of the fund should be invested in New Zealand. Prior to that we had all operated a hands-off approach but unfortunately the National Government interfered with the fund and gave it a direction that a certain percentage of the fund should be invested in New Zealand. Our view was that you should leave that decision up to the fund. But the National Government thinks that it knows better about where to invest money than the fund managers and it was certain that this approach would get a better result. Of course the National Government was quite wrong about that. There is of course an argument for investing a certain percentage of the fund in New Zealand. It is a reasonable argument. But prior to that those of us who supported it—which was Labour and the Greens—had taken a hands-off arm’s-length kind of approach to the fund. So that was important.The next interference in the fund by the National Government came in the form of stopping the contributions. We supported the argument that during times when the Government is running a deficit you should not make ongoing contributions to the fund—and we differed from Labour on this. We supported that argument. The problem was that the Government’s deficit is largely one of its own making. As a result of the big tax cuts to upper-income earners there was a big cut in Government revenue and the result was that Bill English and National drove the books into the red. There were obviously a number of other factors but we would now definitely be in surplus had it not been for the big tax cuts to upper-income earners in New Zealand and we would be in a position to start reinvesting in the fund. Contrary to what Chris Bishop said we have not directed or encouraged the fund to invest in forestry. He is obviously unaware that the New Zealand Superannuation Fund has already invested heavily in forestry.In terms of the fund investment vehicles we discussed this at some length and after a debate we decided not to support this bill because we do not support the fund going to use fund investment vehicles. This is largely because essentially it will facilitate the greater use of tax havens for tax efficiency purposes. The New Zealand Government and the OECD are trying to run a global campaign to protect tax bases for sovereign countries for countries all around the world and so we have been concerned that the fund has been using a bunch of investment vehicles based in the Caribbean that are notorious for tax avoidance—last time we looked it had about $1.6 billion going through there. So although I acknowledge the assurances from the fund that it does not use aggressive tax avoidance measures none the less these kinds of investment vehicles based out of the Caribbean and elsewhere—the Isle of Man and so forth—are notorious for tax avoidance and so we have not supported them for that reason.Of course the broader issue is really about what the investment policy of the fund should be. Really the kind of live debate in that space is now about fossil fuels. This year we released a report showing that the New Zealand Superannuation Fund has investments of about $676 million in companies involved in the production and mining of fossil fuels—currently about 2 percent of the funds under management. It seems to me that a fund that we all voted for in order to protect a secure future for New Zealanders should not be investing in the production of greenhouse gas emissions which is all about insecurity for the future of New Zealanders. If we continue to release greenhouse gas emissions in New Zealand—and globally as well—at the rate that we are currently doing we will produce tremendous insecurity for our children and for those who are going to come after us. The whole purpose of the fund was to provide security. In fact by investing in coalmining in particular the fund is unfortunately contributing to insecurity. I think that part of the investment strategy is a mistaken investment strategy because that is not what the fund was set up for.We have now a series of reports about what kind of investment strategy makes sense both for sovereign wealth funds like the New Zealand Superannuation Fund and also for private wealth funds as to how you should treat fossil fuels. We have seen reports from the World Bank the OECD the International Energy Agency the United Nations and many others that are now saying that the majority of discovered fossil fuel reserves needs to stay in the ground if we are to avoid 2 degrees Celsius of warming. We cannot burn the existing fossil fuels that have been discovered and so those companies whose major assets are fossil fuel reserves are part of a carbon bubble—they are tremendously overvalued. So for the fund to be investing in those companies it is not only bad because of course it is supporting fossil fuel production and out-of-control climate change but it is also a bad investment because it means that the value of those investments in fossil fuel companies will collapse at some point. This is part of what is also known as the unburnable carbon thesis.Recently the Governor of the Bank of England said that the vast majority of fossil fuel reserves that we have now are unburnable if we are to avoid out-of-control climate change. If we are to keep greenhouse gas emissions below a level that would cause 2 degrees Celsius or more of warming then the vast majority of fossil fuel reserves simply cannot be burnt. That is why the Governor of the Reserve Bank is worried about those companies and those investment vehicles that have high exposure to fossil fuel companies. It is because when the carbon bubble pops as we realise that you cannot burn all of those fossil fuel reserves the value of those companies that the funds are invested in drops dramatically. So we will continue to advocate to the New Zealand Superannuation Fund as we have been that it is a bad idea for it to continue to invest in these fossil fuel companies. It is a bad idea in terms of the climate and our kids but it is also a bad idea in terms of a robust financial investment because of what is going to happen in terms of the value of those companies once we get on top of climate change.We continue to support the New Zealand Superannuation Fund as we did at the very beginning when we provided the necessary votes for the fund to come into existence. We continue to support its engagement in a responsible investment framework which it has done extensively. Over the years since the fund was set up we have had many discussions about issues around responsible investment and it has always been pretty respectful about that and has listened to our arguments and has pulled out of a number of companies as a result of the arguments put forward by the Greens and many others about certain companies. So even though we are not supporting this particular piece of legislation today we do retain our support for the concept and we retain our support for the guardians themselves who in general terms have a done a very good job. Thank you.