A new report “from the coalface” of super fund investing has gone some way to quantifying the cost of shonky investment management, with members potentially losing out on hundreds of thousands of dollars.
Surging equity markets have driven the Future Fund’s return higher, but its prediction that inflation will be stickier than expected has been born out and it “remains conscious of the potential for significant deterioration”.
NZ Super sells out of 7 firearms companies
NZ Super has extended its ESG exclusions policy, ridding itself of any investments in companies involved in the manufacture or distribution of automatic and semi-automatic firearms and parts, which are now prohibited under New Zealand law. Seven international stocks have been excluded from its portfolio.
The NZ$41 billion (A$38.7 billion) fund has always had a strong ESG program, consisting of both negative screens (exclusions) and positive screens (actively looking for sustainable investments), which was started by the fund’s first chief executive, the late Paul Costello. Costello, who died last year, was also the inaugural chief executive of the Future Fund, where he instigated a similar program. Both funds have had top quartile performance since their inception.
The latest move follows the passage of new legislation in New Zealand – the ‘Arms (Prohibited Firearms, Magazines and Parts) Amendment Bill’ – on April 10, in the wake of the Christchurch massacre resulting in 50 deaths at the hands of a right-wing white Australian extremist.
For NZ Super, the decision was automatic under its ‘Responsible Investment Framework’, whereby decisions about ethical exclusions take account of New Zealand law.
Matt Whineray, the chief executive, said the Guardians (directors) moved swiftly to review its exclusion policy and portfolio following the announcement of the Government’s intention to introduce new gun control legislation.
The Guardians worked with the fund’s external service provider, MSCI ESG Research, to identify companies captured by the new exclusion category. It will divest NZ$19m of investments in:
- American Outdoor Brands Corporation
- Daicel Corporation
- NOF Corp
- OLIN Corp
- Richemont
- Sturm, Ruger & Company
- Vista Outdoor Inc.
In its announcement last week, the fund said the Guardians updated the exclusion list on a six-monthly basis and it was possible that more companies would be identified for exclusion in the future.
NZ Super also excludes investments in companies involved in:
- the manufacture of cluster munitions
- the manufacture or testing of nuclear explosive devices
- the manufacture of anti-personnel mines
- the manufacture of tobacco
- the processing of whale meat, and
- recreational cannabis.
The fund also excludes a small number of individual companies for severe breaches of responsible investment standards, such as the UN Global Compact, where engagement is unlikely to be, or has not been, effective due to the context of the company’s operations or to a lack of responsiveness from the company to the issue.
– G.B.
