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Engaging with companies to improve their business practices is not well understood as a responsible investment strategy says the Guardians of NZ Superannuation, with the focus tending to exclusion when controversies arise.

The Guardians manages the $58 billion NZ Super Fund and appeared in front of the Foreign Affairs, Defence and Trade Select Committee to discuss its approach to responsible investing (RI).

“The Guardians has a long-standing commitment to responsible investment. We believe environmental, social and governance considerations, including climate change, are fundamental to long-term risk and return,” says Chair Catherine Drayton.

“These “ESG” considerations are integrated into all aspects of the Fund’s investment activities via our Responsible Investment Framework, from asset allocation, investment selection and due diligence to ownership activities such as monitoring our external investment managers, exercising our voting rights and engaging with companies to improve their ESG policies and practices.”

The Guardians recently co-signed an investor statement on human rights and business activities in Myanmar alongside 80+ investors and asset managers with USD4 trillion in assets under management or advisement.

The signatories collectively state they are: “committed to addressing human rights risks in our portfolios, and specifically in the case of conflict-affected Myanmar, we expect companies to uphold their corporate responsibility to respect human rights by undertaking enhanced due diligence to address and prevent human rights harms and in so doing, mitigate risks associated with such violations.”

The engagement is being led by The Storebrand Group (Norway), Domini (US) and the Heartland Initiative, a non-profit research organisation that promotes the fundamental rights and freedoms of people in conflict-affected areas.

The Statement calls on companies across all sectors with business activities or business relationships in Myanmar to:

  • Immediately map their business activities, relationships and/or investments across their value chain in Myanmar to identify and assess human rights risks and harms that they may have or are causing, contributing to, or are linked to including:

    - any and all business relationships, activities and communications involving the Myanmar military, or military owned, controlled or affiliated entities;

    - any revenues from such business relationships and activities that may enrich military owned, controlled, or affiliated business and/or provide funding or support to the Myanmar military made before or after the February 1 coup.
  • Assess and address all identified actual and potential human rights impacts of their business activities and relationships and take steps to mitigate and prevent them.

“Our broadly diversified portfolio is made up of thousands of companies from countries around the world. From time-to-time issues will arise as a result of the conduct of some of these companies,” says CEO Matt Whineray.

“Rather than automatically excluding companies, our long-standing preference is to engage them to encourage improvement in their policies and practices, which is what we are doing in Myanmar. Exclusion is a last resort that we may choose to undertake if we believe engagement will be ineffective or has proven to be ineffective.”

The Guardians was a founding signatory of the United Nations-backed Principles for Responsible Investment – the leading global network for investors to demonstrate commitment to responsible investment, to collaborate and learn with peers about the financial and investment implications of ESG issues, and to incorporate these factors into investment decision making and ownership practices.

The Guardians’ approach has been recognised internationally, including:

  • appointment to the PRI’s Leaders Group for a second year as a result of demonstrating "a breadth of responsible investment excellence”;
  • receiving an A+ rating from the PRI for our responsible investment governance and strategy for the last 5 years;
  • being named one of the world’s most responsible sovereign wealth funds in a major study released by the Bretton Woods II programme, and;
  • in 2019 the Government appointed global investment consultancy Willis Towers Watson to undertake this review of the Guardians and Fund, it rated the Guardians’ RI approach as “excellent”, noted the organisation’s transparency and said its approach to integration, engagement and exclusions was aligned with best practice standards.

The Guardians’ RI approach was also examined recently by the High Court, which supported the way in which the Guardians gave effect to its statutory mandate by way of responsible investment policies and practices.

More information on the Myanmar Investor Statement can be found here.