Robertson Grant: Ethical Investment (Crown Financial Institutions) Bill — First Reading 
Robertson Grant: Ethical Investment (Crown Financial Institutions) Bill — First Reading 
[Volume:665;Page:13003] 
GRANT ROBERTSON (Labour—Wellington Central) 
: 
 I move  
That the Ethical Investment (Crown Financial Institutions) Bill be now read a first time. 
 At the appropriate time I hope and intend to move that the bill be considered by the Finance and Expenditure Committee. This bill seeks to ensure that our Crown financial institutions invest the money of New Zealanders in an ethical manner. It does that by amending the relevant legislation for Crown financial institutions setting forth investment policy criteria consistent with internationally recognised norms and conventions for ethical and socially responsible investment. Although Crown financial institutions do not directly control their investments this framework will require them to instruct their fund managers to invest according to the criteria described in the bill. I want to stress that the main goal of our Crown financial institutions is and should be to generate healthy returns that can fund our future commitments to accident compensation superannuation and other key initiatives. This bill will not change that nor does it aim to change that. It is quite clear that part of sustainability for a business or indeed for an investment fund is to be profitable. This bill continues that as a key goal but it introduces meaningful criteria to guide and instruct those funds to invest in a manner that is ethical and socially responsible. 
A bill such as this one will inevitably raise questions about what the word “ethical” means. In the context of this bill it is defined as being socially responsible and environmentally responsible. UN conventions and treaties in those areas are used to set the parameters of what “ethical” is. Essentially it means that Crown financial institutions will be expected to invest in organisations that maintain good human rights and labour standards are conscious of their ecological footprint and are not engaging in activities that are harmful to resources such as water land and air. “Ethical” also requires that stakeholders are treated fairly and that the organisation maintains good governance finance ethical integrity and transparency. I take the opportunity to commend the investment policies that our Crown financial institutions have already implemented. 
At the same time I pay tribute to my colleague Maryan Street. She conceived this bill at a time when Crown financial institutions had no policies and had taken no action regarding their responsibility to invest as the law currently has it in a way that does not prejudice New Zealand’s international reputation. Maryan Street in her role as the Minister for ACC worked hard with the Accident Compensation Corporation (ACC) to improve its investment policies and since then a number of other actions have been taken. In particular the New Zealand Superannuation Fund has excluded investment in certain activities such as whaling some nuclear weapons and landmine manufacturers. It has also engaged with companies using the UN criteria for socially responsible investment and all of our Crown financial institutions have discontinued their investments in tobacco. Policies such as those should be encouraged and supported. Furthermore their existence demonstrates that New Zealanders and Crown financial institutions recognise the importance of ethical investment and are willing to act to implement it practically. However they do not indicate that nothing else needs to be done nor should they be seen as an excuse to sit back and fail to consider what else could be done. There are several reasons I believe why changes are desirable. Having in our legislation a commitment to avoiding damage to New Zealand’s reputation is a defensive position in my view in terms of ethical investment. Parliament should be acting not only to back up the ethical investment policies we already see from our Crown financial institutions but also to extend them in a positive manner. 
This bill would establish Crown financial institution ethical investment criteria as law not relying simply on whether the guardians of the Superannuation Fund at a particular time believe ethical investment is a good thing or whether a particular Minister wants to encourage it within ACC. It would put that into law give some consistency across our Crown financial institutions and extend the policies. It would also demonstrate Parliament’s support for ethical investment. Policies on ethical investment for our Crown financial institutions need streamlining clarity and consistency. At present legislation for all of the Crown financial institutions remains vague and inconsistent when it comes to what ethical investment might actually mean. My bill would remedy that by creating consistent and extended ethical investment criteria across the Crown financial institutions. It would also provide more direct guidance to the managers of the funds and importantly as I said before that would occur without taking away any of the fund’s decision-making power. The bill also aims to improve accountability and transparency by requiring more adequate reporting of the social and environmental impacts of each Crown financial institution’s investments. Such reporting practices would also bolster each Crown financial institution’s ability to respond to public interest. Although the changes that are being made by the Superannuation Fund and ACC are to be applauded there are still issues to do with reporting and engagement with the investment managers and companies on how they go about interpreting ethical investment. 
The New Zealand people support ethical investment. We saw that when the public opposed the Superannuation Fund’s investments in companies involved in cluster munitions and nuclear weapons. The public sentiment is also backed by civil society groups which are active in New Zealand in support of Crown financial ethical investment. Such groups include Investment Watch Aotearoa/New Zealand and the Council for Socially Responsible Investment and I thank them for their support and encouragement on this bill. I have also received support and encouragement from organisations such as Amnesty International and Oxfam and a much broader group of non-governmental organisations around the world are working hard to encourage that work. 
Internationally there is increasing support for ethical investment and a growing trend amongst both public and private investors to invest ethically. The UN has endorsed ethical investment. The UN Principles for Responsible Investment which embody an internationally accepted framework for investors to manage environmental social and governance issues in a manner consistent with improving long-term returns has gained widespread support from companies and State financial institutions alike receiving over 700 signatures. Other countries have adopted ethical investment policies for their State institutions. 
A particularly successful example is the Norwegian pension fund the Government Pension Fund - Global. It is the second-largest sovereign wealth fund in the world with assets of over $400 billion. Its investment decisions must be consistent with a set of ethical guidelines. They are extensive guidelines. For instance the assets of the fund shall not be invested in companies that themselves or through entities they control produce weapons that violate fundamental humanitarian principles produce tobacco or sell weapons; people who undertake serious or systemic human rights violations such as murder torture the deprivation of liberty forced labour the worst forms of child labour and other child exploitation; serious violations of the rights of individuals in situations of war; severe environmental damage; gross corruption; and other particularly serious violations of fundamental ethical norms. This fund is able to be successful with those criteria. Another aspect of the Norwegian fund’s operations that I think is useful and is something that we can talk about further if this bill proceeds is the ability for it to establish relationships with companies that the fund invests with in order to observe their behaviour and to ensure that it is ethical. 
It is important that this becomes a positive measure rather than a defensive measure. Companies that are seeing their investments potentially withdrawn will want to know in advance that that is a possibility and potentially change their behaviour. So the Norwegian Council on Ethics is involved in observing the behaviour of individual companies. Meanwhile in Sweden the five largest State-controlled pension funds are required by law to follow environmental and ethical considerations in their investment policies and to report annually to the Government detailing how they are adhered to. Sweden and Norway are only two examples of States that have adopted ethical investment for their State financial institutions. 
These international developments give us food for thought. New Zealanders are justifiably proud of New Zealand’s stance on the world stage in areas such as human rights the environment nuclear weapons cluster munitions and landmines. Therefore it makes sense for us as a country to put our values into practice in the way our Crown financial institutions invest public money. It also makes sense for us to avoid the embarrassment of unethical Crown financial investments prejudicing our international relationships. This bill is a tangible means of practising what we preach. It is a tangible means of enhancing New Zealand’s image on the world stage and proving that we are socially conscious and environmentally sound. I commend the bill to the House.