GNZS Announce Decision on Cluster Munitions (4 April)
POSTED ON: 4 April 2008
Auckland (4 April 2008) - The Guardians of New Zealand Superannuation today announced their intention to exclude from the Fund companies that remain involved in the manufacture of cluster munitions. The New Zealand Government is working to conclude negotiations during 2008 on an internationally binding treaty on cluster munitions. Negotiations are managed through the Oslo Process. International support for the Oslo Process was demonstrated at the recent Wellington conference when 82 States subscribed to the Wellington Declaration. The Guardians will implement their exclusion plan upon New Zealand signing the new treaty.
The Guardians' Chief Executive Officer, Mr Adrian Orr, said "The Guardians have been reviewing the issue of cluster munitions manufacture against our responsible investment guidelines for some time. As is evidenced by the ongoing work of the Oslo Process, we have not been alone in our deliberation. We are legally obliged to manage the Fund in line with best-practice portfolio management, to maximise return without undue risk to the Fund as a whole, and to avoid prejudice to New Zealand's reputation as a responsible member of the world community.
"Cluster munitions are not currently subject to specific restrictions under international or national law. To date it has been very rare for funds to engage with, or exclude investments in, companies involved in the manufacture of cluster munitions. With the forthcoming international treaty, we can unambiguously conclude that such practices breach our responsible investment standards. Exclusion of these stocks is also not inconsistent with best-practice portfolio management," concluded Mr Orr.
As at 30 June 2007, the Fund held approximately NZ$26 million of investments in companies that have been identified by an external screening agency as being potentially involved in some way in the manufacture of cluster munitions. This was equivalent to 0.20% of the Fund's total assets. These investments were made by external investment managers as they gained broad exposure to listed equity asset classes internationally.
The Guardians have a transparent Responsible Investment Policy, screening mechanisms, and a decision-making framework. The policy guidelines include consideration of globally accepted responsible investment standards, international conventions, national law, and significant Crown actions. If a responsible investment issue arises, the Guardians have a strong preference to seek to influence the practices of companies through engagement as a shareholder, and by exercising their voting rights. However, under certain circumstances, divestment and exclusion are considered, and past exclusions have been made in relation to landmines, whaling, and tobacco.
The Guardians' responsible investment framework and activity updates can be found on the Fund's website as well as background information on the Guardians' decision on the cluster munitions issue (available here).
About the New Zealand Superannuation Fund: The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, is designed to partially provide for the future cost of New Zealand superannuation. An ageing population means the cost of providing New Zealand superannuation is expected to double over the next 50 years. To prepare for this, the Government plans to allocate around $2 billion a year to the Fund over the next 20 years while the cost of superannuation is relatively low.
As the cost of superannuation escalates, the Government will progressively draw on the Fund to help smooth the impact on its finances. As at 29 February 2008 the value of the Fund was $13.5 billion. The Fund is expected to grow to around $109 billion by 2025.
The Guardians must manage the Fund on a prudent, commercial basis and, in doing so, must manage and administer the Fund in a manner consistent with - (a) best practice portfolio management; and (b) maximising return without undue risk to the Fund as a whole; and (c) avoiding prejudice to New Zealand's reputation as a responsible member of the world community.