Inside Money: Stay away or stay engaged?
9:30 AM Tuesday Nov 29, 2011
Superannuation Fund chief Adrian Orr. Photo / The Listener
The New Zealand Superannuation Fund (NZS) has been forced to defend its responsible investment credentials once again, hitting back at claims contained in the latest Metro magazine concerning the fund's exposure to a controversial West Papuan mine.
I haven't seen the Metro article but an earlier piece in the New Zealand Herald also takes a swipe at NZ Super's investment in the Grasberg mine operated by Freeport McMoran in association with Rio Tinto.
With almost $18 billion under management it's inevitable that there would be something in the NZ Super portfolio to cause offence, and the Freeport mine ticks all the ESG (environment, social, governance) boxes: open-cast ugliness; repressive political environment; accusations of bribery.
Whatever the details of the Freeport mine - and they're undoubtedly horrible - NZ Super boss, Adrian Orr, raises some interesting points while defending the fund's $1.3 million investment in Freeport.
While Orr explained that the NZS has a combined $20 million in Rio Tinto and Freeport invested passively (where it tracks an index rather than selects specific stocks), the real argument boils down to whether staying 'engaged' makes a difference.
That is, should institutional investors (particularly, government-owned funds) sell out of any controversial investments or try to bring about positive change from within?
"We believe that our engagement, and that of other investors and of Non Governmental Organisations, has improved the practices at the mine and the disclosure of those practices," Orr said in the statement. "... For us, walking away might be simpler and quicker than staying engaged, it might avoid critical coverage, but it changes nothing."
Although further evidence of these stated improvements is required, it's a good argument - should 'engaged' owners simply sell out to shareholders who don't even have to pretend to care about ESG issues or reveal their interests?
Ironically, NZS leaves itself open to such criticism because it is transparent. It does a good job of explaining how why, and where it invests, including a lengthy 'responsible investment' policy.
But while it tries to do good, according to the NZS statement, responsible investment "is not about making New Zealanders feel good about the (NZS) investments".
Many people invest with moral considerations, but I don't think that is the place of a superannuation fund unless it has a mandate. Specifically, if a fund is basing its investments on a certain moral criteria as well as an economic one then it should be stated at the outset so people can invest accordingly.
That isn't to say that the free market can be left to determine morality, but I don't share the fatalist view you have of capitalism. As for private American prisons I couldn't care less if my superannuation fund invested in that if it made economic sense. If the American public are satisfied as to the morality of it then so be it, they aren't an exploited 3rd world nation.
yet strangley no American corporations of the time were held accountable at the Nuremburg trials. Should investors be able to rinse their hands, particulary in companies with far reaching ethical issues like monsanto's, then take into account the corporate/private prisons, now a boom market in the US, the land of the free, oh the irony with that claim.
Yes we should be aware of where our investment are invested, but can we be.
It should be taken even further does capitalism have any morale boundries, looking at history no it hasnt.