KEY POINTS:
If we are serious about social and environmental sustainability, it is imperative that we move our economy to a more sustainable footing.
What happens in the economy has a huge influence on what happens in the rest of our society. All the Government programmes under the sun won't
produce sustainability if the economy is structured against it.
One of the levers that we have to move our economy in a sustainable direction is investment policy.
By investing in companies engaged in sustainable activities, we increase the capital available for those companies. And by refusing to invest in unsustainable companies, we decrease the capital available to them.
The good news is this kind of socially responsible investment is a rapidly growing part of global investment funds. The bad news is the portion of your taxes being invested on your behalf are not part of it.
As a citizen and taxpayer you are part-owner of a $12 billion investment fund called the New Zealand Superannuation Fund. This Fund was established by the Labour-led Government in 2001 with the purpose of partially covering the future cost of New Zealand Super.
Unfortunately, despite the best efforts of the late Rod Donald, the legislation that established the Super Fund did not contain particularly clear directions on sustainable or socially responsible investment.
The result is that the Fund has made some very irresponsible investments, including in companies deeply involved in the manufacture and maintenance of nuclear weapons.
These companies are not just marginally involved in producing the odd component that has uses other than nuclear weapons. For example, the US weapons manufacturer Northrop Grumman is involved in the development, production, assembly and maintenance of nuclear weapons systems. Northrop performs maintenance on, and upgrading of, the US Minutemen Intercontinental Ballistic Missiles.
The only known purpose of these missiles is to send nuclear bombs around the planet to incinerate civilians in a nuclear war that would end civilisation as we know it. Your taxes are invested in Northrup to the tune of $9 million.
There are many other Super Fund investments that other funds avoid because of the companies' involvement in activities such as the manufacture of cluster bombs, the destruction of the environment and breaches of fundamental labour and human rights.
The Greens believe the Super Fund should be investing our money to ensure we have a better future - not investing in activities that threaten our future. We should use whatever economic clout we have to pressure bad companies to behave better by refusing to invest in them, and support companies that are engaged in good activities by investing in their stocks.
Not everyone agrees with this approach and there are four arguments that have been put forward for why we should not give the Super Fund a stronger and clearer mandate to invest our taxes ethically and sustainably.
The first is the "greyness" argument that says if a company has activities other than making nuclear weapons this creates ambiguity, which makes it too hard to decide whether to invest. So the existence of grey means there is no black and no white.
But black and white do still exist, and even the existence of grey is not an excuse to do nothing.
Other superannuation funds around the world have developed criteria to guide socially responsible investment decisions. The Norway Pension Fund, the biggest in the world, looked at the involvement of the Boeing corporation in nuclear weapons manufacture and decided to disinvest, even though Boeing also makes civilian airliners. They made a judgment call that the nukes are bad.
The second argument is what I call the ethical relativism argument: there is no universal agreement as to what is ethical so how can the Super Fund make the call on behalf of all of us?
But of course every day our democratically elected representatives have to make a call on what is ethical on behalf of the whole community. Parliament is capable of devising ethical guidelines for the New Zealand Super Fund. Not everyone will agree with them but we have to draw a line somewhere.
The third argument is that ethical investment will restrict the Fund's ability to make a good return on investments. This is patently false. Ethical investment funds around the world are making good returns.
The latest study from AMP Capital Investors in Australia showed the median socially responsible investment manager outperformed the ASX 200 index of Australian stocks over five years to March 31 2006.
There is a plethora of other studies reaching similar conclusions. Managers who exclude the worst companies and weight their portfolio towards socially responsible and environmentally sustainable companies actually get a better return on average.
Finally, some say the Fund can't act ethically because it must operate at arm's length from the Government. But it is simply a matter of establishing ethical guidelines in the law governing the Fund and then asking the Fund to operate within those guidelines.
This is standard practice in many EU countries and exactly what Rod Donald tried and failed to get Michael Cullen to do when the Fund was established. The Government need not be directly involved in any of those decisions.
Socially and environmentally sustainable investment isn't just about feeling good about ourselves. It's about giving the right signals to the capital markets so that the market gives us more of what's good for people and the planet, and less of what's bad.
* Russel Norman is the Green Party's co-leader.
