Simplicity faces responsibility questions

Simplicity founder Sam Stubbs is rejecting criticism that his responsible investment stance doesn’t go far enough.

Tuesday, October 2nd 2018, 6:00AM 2 Comments

In June, the fund manager added fossil fuel extraction, military and civilian weapons, pornography, gambling and casinos and alcohol to its list of exclusions. It already excluded companies involved in tobacco, landmines and nuclear weapons.

But the broker basket for the Vanguard Ethically Conscious International Shares index, in which Simplicity’s KiwiSaver invests for its international equities, has exposure to energy manufacturing firm Phillips 66 and Marathon Petroleum.

Stubbs said those were not involved in fossil fuel extraction, only refining.

It also invests in companies that have been excluded by others for responsible investment reasons, such as Toshiba, excluded by Kiwi Wealth for its nuclear power involvement and Tokyo Electric, excluded by Kiwi Wealth and the NZ Super Fund for the same plus environmental damage and human rights concerns.

Stubbs said those companies were in areas for which Simplicity did not have a specific view on individual company actions - such as the Israeli/Palestinian conflict, environmental issues and human rights.

“The reality is this is one set of subjective assessments vs another. We’ve chosen to work with Vanguard and FTSE to come up with exclusions that are commonly agreed to be in areas most would want excluded, and by excluding should lead to enhanced returns. None on our list are particularly controversial, most would agree with what we’ve done,” he said.

“However, this can quickly turn into a headline-grabbing tit for tat, and fund managers claiming to be holier than thou. Ethics are not universal, so it’s important to do the right thing, but also draw the line somewhere. But it’s a debate that should never go away, it’s a good one.”

He said there would always be people who thought more stocks should have been excluded.

“I think we deserve credit for helping get Vanguard to a place where they offer these funds globally, and in our first two years we’ve been the seed investor for four Vanguard ethically driven funds, and applying this philosophy to all our investments. We will never be perfect in everyone’s eyes here, but we are doing a lot to forward ethically conscious investing."

Tags: responsible investing Simplicity

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Comments from our readers

On 2 October 2018 at 5:54 pm CJ2 said:

I love how Sam thinks he influences Vanguard and is an ethical white knight, when the truth is so far from the spin.

On 3 October 2018 at 1:27 pm MartyMcFly said:

It was only last week ..... "Stubbs said fund managers could be failing their fiduciary duty to clients by not following a responsible investment strategy."

This week..... "Simplicity did not have a specific view on individual company actions - such as the Israeli/Palestinian conflict, environmental issues and human rights". Tokyo Electric owned the the Fukushima nuclear reactor that melted down in 2011. The Fukushima Nuclear Accident Independent Investigation Commission (NAIIC) found that the causes of the accident had been foreseeable, and that the plant operator, Tokyo Electric Power Company (TEPCO), had failed to meet basic safety requirements such as risk assessment, preparing for containing collateral damage, and developing evacuation plans.

Sam could you please produce your activist shareholder communications to Tokyo Electric showing what you have done to ask them to clean up their act?

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