Govt shoots down member’s bill for ethical investment

The government shot down a private member's bill that would have legislated for crown entities to invest in an environmentally and socially responsible manner, saying it was unnecessary.

Friday, August 6th 2010, 5:08AM 8 Comments

The bill, sponsored by Labour Party MP Grant Robertson, was voted down by the National and Act Parties, with government backbench MPs Craig Foss, David Bennett and Aaron Gilmore calling legislation unnecessary.

Market support for responsible investing was already leading investment away from less palatable companies, and the direction from former Finance Minister Michael Cullen to the five biggest government-owned fund managers, which manage $45 to $50 billion of assets, National's Foss told Parliament.

Labour's Robertson accepted the bill might have needed some tightening around how to define which companies are ethical and which are not, but said those things could be ironed out in the select committee process. Having got support from the Green and Maori Parties, he urged the government benches to support it.

"The Bill sought to have clear and consistent criteria for ethical investment in the legislation that govern our major investment funds such as the Super Fund and ACC," Robertson wrote on the Labour Party's Red Alert blog.

"The criteria are based on international norms and treaties and emphasise the importance of investing in organisations that have good governance, treat their stakeholders fairly and uphold human rights and good labour standards," he said.

Labour's David Cunliffe said the bill would give more clarity to the crown-owned funds by giving managers guidance as to what was deemed unethical investment.

 

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Comments from our readers

On 6 August 2010 at 8:33 am Norman Stacey said:
A good call.I think it is a fair assumption that most investors are environmentally sound, ethical and socially responsible.
Of course if anything is "unsustainable" we needn't worry because, by definition, it won't last.
It is a bit concerning that Mr Cunliffe feels Government managers need 'guidance as to what was deemed unethical investment'. Perhaps privatize 'em.
On 6 August 2010 at 9:26 am Peter said:
How naive; to think most investors are environmentally, socially or any or form of ethical. I hate to point this out but things that make serious money tend to be none of the above.
On 6 August 2010 at 9:49 am Oliver said:
In a long term perspective investing in environmentally sound, ethical and socially responsible companies is a better solution and will make more money. But most investors invest for short term. And in this case Norman's assumption does not work, because companies who externalize the environmental/social/ethical costs to the society at large will make more profit in short term.
By taking this decision the government shows it does not have a long term and sustainable vision for New Zealand, but rather a short term narrow minded election oriented vision for itself.
On 6 August 2010 at 9:56 am Billy said:
Surely a sustainable business or investment is one that continues to make a profit.
On 6 August 2010 at 2:31 pm Kimble said:
"In a long term perspective investing in environmentally sound, ethical and socially responsible companies is a better solution and will make more money."

Really? Why?
On 6 August 2010 at 3:29 pm Dr Robert Howell said:

Ethical Investment (Crown Financial Institutions) Bill

Dr Robert Howell, CEO, Council for Socially Responsible Investment, said that the failure of the Government to support the Ethical Investment (Crown Financial Institutions) Bill was unfortunate and short sighted. The Government missed an opportunity to remove the contradictions of the current legislation, and the chance to strengthen the risk analysis for future investment.

The current criteria for the Crown Financial Institutions is contradictory. In New Zealand we recognise that there are social and environmental boundaries that the market cannot determine, and which are provided by legislation. Investment, for example, cannot be used to severely damage the environment, or for companies that use child labour. As New Zealanders we accept this here, but the criteria for the CFIs does not restrict that type of investment overseas. It is not OK to pollute here in New Zealand, but it is OK overseas. The Bill would have removed that contradiction.

By establishing proper social and environmental criteria, the CFIs would carry out a much more rigorous risk analysis necessary for identifying the global drivers that will determine successful future investment. Social and environmental factors will continue to increasingly influence economic activity, and the bottom line of companies. The Government has unfortunately missed the opportunity to require a more robust business approach for the Crown Financial Institutions.

Dr Robert Howell
CEO, Council for Socially Responsible Investment.
On 6 August 2010 at 4:01 pm Kimble said:
Unfortunately, Robert, your argument is easily countered.

In New Zealand we have a minimum wage. Should we not invest in overseas companies overseas that dont pay every worker at least as much as our minimum?

Nuclear energy is not used in New Zealand, do we ban investment in companies in other countries that produce nuclear power? How about the companies that profit from its use?

In New Zealand we have laws that require cars to be right-hand drive. Do we not invest in overseas companies that produce left-hand drive cars?

Why limit the SRI to CFIs? Why not rule that any government department that uses imported products only do so if they were made by companies that match our rules?

You also make the assumption that SRI analysis will lead to better investment decisions, but I am not sure that is the case.
On 11 August 2010 at 11:27 am James said:
The BP spill disaster is a classic example of where environmental and economic sustainability merge.
Prior to the gulf disaster BP had a growing track record of negligence, including the Alaska pipeline and Texas oil refinery disasters.
Good SRI funds would pick up on incidents like these, and avoid investment, thus saving their shareholders from the massive losses that BP was hit with and will continue to be hit with.
There are a lot of dumb fund managers out there that don’t research companies enough, and just get excited about uphill sloping graphs.
Deep sea drilling is now going to start to reflect the true cost as safety measures are increased.
Excluding tobacco, alcohol, firearms, nuclear energy and weapons, landmines, cluster bombs child labour, blood diamonds etc isn’t hard, but NZ SOEs seem to be having trouble pulling their fingers out, If you invest in companies run by Charles Taylor you deserve to loose your retirement fund.
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