The Super Fund has been criticised for complacency after it was caught holding shares in a tobacco company despite a policy banning such investments.

The Superannuation Fund was today revealed to hold 80,000 shares worth about $333,000 in Shanghai Industrial Holdings Ltd, whose Nanyang Brothers Tobacco subsidiary is involved in the manufacture of tobacco.

The investment, revealed in response to a written question from the Green Party, goes against the fund's 2007 promise to divest from tobacco-related industries.

The Super Fund said it was aware of the issue and would exclude the company from its investment portfolio.


The revelation comes after the fund was found to have invested $2.1 million Larsen and Toubro, a Mumbai-based multinational involved in building a fleet of nuclear-armed submarines for India.

Green Party co-leader Russel Norman today said the fund had a "long record of complacency towards ethical investment'' and it was no surprise it been caught investing in tobacco.

"The fund directors have been caught out previously for unethical investment behaviour after it was revealed they were profiting from the whaling industry and the cluster munitions industry,'' he said.

"This is not a professional way to manage a $19 billion investment fund and risks serious damage to our reputation as a responsible member of the world community.''

Dr Norman said he thought the investment was inadvertent but that suggested the fund's screening was not very good.

"I think their defensive attitude towards it, and quite a complacent attitude towards responsible investment, shows up in the fact they missed this one,'' he said.

"It's pretty concerning as to what else they might be investing in.''

Finance Minister Bill English said the fund had one of the world's most developed ethical investment policies.

"The Super Fund has quite a complicated ethical investment policy and I'm sure if there's any concern about the nature of this investment, superannuation fund will be on top of it,'' he said.

Mr English said he would be surprised if the investment breached any international commitments but that was an issue for the fund.

The fund said in a statement that it used several different screening methods to ensure its investment exclusions were complied with, all of which used industry classifications.

Shanghai Industrial Holdings Ltd was involved in a broad range of activities and was classified as an industrial conglomerate, so was not captured by its screening process.

The fund was aware of the issue and had recently broadened its screening methodology, resulting in more companies, including Shanghai Industrial Holdings Ltd, being added to its tobacco exclusion list.

The updated exclusion list would be circulated to external investment managers before being published on its website by the end of the month.

The fund said its responsible investment programme relied on a number of sources of information, including third parties like the Green Party, and it appreciated such matters being brought to its attention.