NZ Herald Focus logo
FCM Travel logo
Matt Nippert is a business investigations journalist.

KiwiSaver providers dump $109m of weapon and tobacco investments

KiwiSaver providers have dumped at least $109 million in controversial weapon and tobacco investments following a Herald investigation into responsible investment policies.

The Insights series Dirty Secrets of Your KiwiSaver found providers managing the retirement savings accounts for more than 2 million New Zealanders had made $153m of investments in companies blacklisted for ethical reasons by the government-run New Zealand Superannuation Fund.

The companies included a swathe of armaments firms involved in making cluster bombs, landmines and nuclear weapons - munitions banned under New Zealand law - and firms making tobacco or guilty of gross human rights abuses.

In the four weeks since the story broke, first covered by RNZ's Anusha Bradley, KiwiSaver providers have moved swiftly to distance themselves and their clients' funds from the controversy.

According to Herald analysis of disclosures to the Financial Markets Authority and interviews with providers, it appears 99.6 per cent of KiwiSaver holdings in companies making banned weapons (or $43.25m out of $43.44m originally invested) has been, or are in the process of being, dumped.

Aon, the only provider retaining a stake in the broad sector, said its own screening research had concluded - contrary to NZSF findings - that US firm General Dynamics was not involved in the production of cluster munitions.

The matter of investments in the weapons companies had raised potential legal concerns, with official advice to Minister of Commerce Paul Goldsmith suggesting locals laws banning the weapons - and support of them - applied to KiwiSaver fund managers.

Goldsmith said it was up to Police to decide to look into the matter, spurring a formal complaint by Amnesty International.

Last week Police, after consultation with the Financial Market Authority, declined to investigate saying there were "significant threshold issues" as fund management often involved indirect investments in secondary markets.

Other investment classes investigated by the Herald and blacklisted the NZSF have also shrunk dramatically from KiwiSaver funds over the past month. Holdings in tobacco companies have declined nearly two-thirds.

Of the $153m in NZSF-blacklisted investments identified by the Herald, a total of $109m has been flagged for divestment.

The trend has been heavily influenced by ANZ who, along the associated funds from OneAnswer, are the largest KiwiSaver providers and held - according to Herald calculations - the largest stake by value and proportion of investments in the controversial companies.

An ANZ spokesperson explained their decision-making: "We are doing this because it is the right thing to do and we recognize that many of our members are concerned about their KiwiSaver money being invested in these industries."

The past week has seen smaller providers also confirm similar moves. Mercer this week announced an exit from investments in banned weapon-makers and that other sectors were undergoing a "thorough review".

NZ Funds said they had recently divested in full from companies flagged for making landlines and environmental concerns.

Fisher Funds moved quickly in removing exposures identified by the Herald, and its chief investment officer Mark Brighouse said this policy of exclusion extended to indirect holdings and that the wider debate sparked by the series had proved useful.

"You have done a good job of raising awareness and I think that's especially important in the case of tobacco. Tobacco is an example of where refusing to invest in the companies will have its greatest impact when it contributes to a heightened public debate and brings about a more direct response by society to tobacco products," he said.

While the debate over direct holdings appears to have been largely settled, the issue of indirect holdings - particularly in index-tracking funds like those managed by firms such as Vanguard - is more vexed.

The Herald analysis was only able to identify individual investments disclosed in FMA filings, and indirect holdings in controversial companies is likely to be much more widespread but, in terms of value, less substantial.

Debate within the industry is ongoing about how to efficiently mesh the specific concerns of New Zealand investors with acess to diversified global equity investments.

For instance ASB has committed to an exit from index-tracking funds featuring the banned weapon-makers, while Westpac notes "exposure to any stock only arises to the extent that any of those companies constitute part of the index".

- NZ Herald

Get the news delivered straight to your inbox

Receive the day’s news, sport and entertainment in our daily email newsletter


© Copyright 2016, NZME. Publishing Limited

Assembled by: (static) on production apcf04 at 27 Oct 2016 12:45:14 Processing Time: 511ms