9. Crown Financial Institutions—Compliance with Ethical Investment FrameworkJAMES SHAW (Co-Leader—Green) to the Minister of FinanceCrown Financial Institutions—Compliance with Ethical Investment Framework9. JAMES SHAW (Co-Leader—Green) to the Minister of Finance: Would he act to further regulate Crown Financial Institutions if they were found to still be directly or indirectly investing in companies involved in the manufacture of cluster bombs nuclear weapons land mines tobacco or whaling?Mr SPEAKER: Before I call the Minister my office has been advised that this answer may be longer than normal in an attempt to fully inform the member.Hon BILL ENGLISH (Minister of Finance): No. And I would just like to explain briefly for the member how the independent investment activities at Crown Financial Institutions (CFIs) are already subject to a range of requirements for ethical investment. Each CFI runs an exclusion list that prevents direct investment in the companies on those exclusion lists. All of the activities that the member asked about are excluded by these lists. CFIs may also invest in what are called collective investment vehicles (CIVs). Most recent figures show that CIV investments are a small proportion—around 3 percent of ACC in New Zealand Superannuation and 13 percent of Government Superannuation Fund portfolios which total just short of $70 billion. If a CFI learns that a collective investment vehicle has invested in a company on its exclusion list—that is investing in the activities that the member referred to—the CFI will engage with the fund manager to try to influence their behaviour or consider divestment. Finally all CFIs are signatories to the United Nations Principles for Responsible Investment and have adopted the UN Global Compact. These require signatories to establish a responsible investment framework which is subject to the following statutes and resolutions: the New Zealand Nuclear Free Zone Disarmament and Arms Control Act 1987 the Cluster Munitions Prohibition Act 2009 the Anti-Personnel Mines Prohibition Act 1998 and two UN Security Council resolutions regarding nuclear weapons.James Shaw: So given all of that is he saying that it is acceptable for the Government to indirectly invest in and profit from companies that manufacture cluster bombs that blow the legs off children?Hon BILL ENGLISH: We would expect that the fund that became aware of an investment in one of the excluded activities would then take the action required to comply with its own rules—that is either to influence in this case the collective investment vehicle that may be investing at one or two arm's lengths from such activities or to divest.James Shaw: Is he aware that the Government Superannuation Fund Authority continues to invest in three tobacco companies even though the authority itself has found these companies unethical and is it not time to make the law clearer?Hon BILL ENGLISH: I think the law is pretty clear and the Superannuation Fund should comply both with the law and with the ethical investment framework which I am advised is one of the most developed among sovereign funds in the world.James Shaw: I raise a point of order Mr Speaker. Just for clarity I was referring to the Government Superannuation Fund Authority not the Superannuation Fund.Mr SPEAKER: My difficulty is that the member actually asked two questions. He then also asked whether it is not time to make the law clearer and the Minister immediately addressed that. So he has answered one of the legs and that is enough to satisfy.James Shaw: Does he agree with the ACC investment fund's position statement stating that it thinks indirect investments in cluster bombs manufacturers are perfectly legal?Hon BILL ENGLISH: Again we would expect it to comply both with the statute that creates a framework for its investment decisions and with any undertakings that it has made as I said as signatories to the United Nations Principles for Responsible Investment. I think the member would probably give credit to these organisations that as and when issues are raised regarding investment in companies that are on the exclusion list from what I have seen in each case the funds have acted appropriately.James Shaw: I seek leave to table the ACC investment fund's position statement on investment in cluster bombs obtained under the Official Information Act.Mr SPEAKER: Is it freely available on the ACC website?James Shaw: No. We could not find it on the website.Mr SPEAKER: On that basis I will put the leave. Leave is sought to table that particular position statement. Is there any objection? There is none. It can be tabled.Document by leave laid on the Table of the House.James Shaw: Is it not a double standard for the Government funds to continue to invest indirectly in cluster bomb makers for example when KiwiSaver providers immediately dropped their indirect investments?Hon BILL ENGLISH: I would not use that term—in the first place I am not exactly sure whether what the member says happened has actually happened. Secondly in respect of the Crown financial institutions we would expect them as I said to act consistently with the statute and in fact with general expectations around the United Nations principles and so on. If it is the case that ACC is not complying with those then that would be a matter of governance which I am sure would be raised with it.James Shaw: Is it ever OK to fund cluster bombs?Hon BILL ENGLISH: No but I do not think that is the issue here. The issue here is how these financial institutions deal with the situation where much of the levy payers' funding that they have is invested indirectly often at two or three arm's lengths from the New Zealand decision maker—that is invested in collective vehicles which are then investing in further collective vehicles. We would expect them to have the systems that enable them to be able to track their investments and respond consistently with the framework in a way that I think the member and the Government would probably agree on.James Shaw: Given that when the New Zealand Herald broke the story a few weeks ago about KiwiSaver investments indirect investments in these kinds of companies how come it was that it was able to move within a matter of a few days and yet the Government funds do not seem to have been able to find that information?Hon BILL ENGLISH: I cannot answer that question directly. I think it is safe to say that KiwiSaver funds managers made statements within a few days. Just whether they have been able to divest I think is another matter that you would have to check up with them. But we would expect Crown financial institutions to act in a way that is consistent with their own ethical investment practices and with the statutes that govern them.