Ethical investing on human rights grounds 'too hard' - Simplicity

Simplicity founder Sam Stubbs says New Zealand managers only have so much control over international investments and that it's "too hard" to make exclusions on human rights grounds.

Wednesday, July 31st 2019, 5:44PM

by BusinessDesk

The non-profit KiwiSaver provider relies on Vanguard Investments to screen international equities to exclude fossil fuels, alcohol, tobacco, gambling and casinos, civilian firearms, adult entertainment, military weapons and nuclear weapons.

However, like many passive investors, the Vanguard fund is invested in Barrick Gold, the world's biggest gold miner and ultimate owner of the controversial North Mara mine in Tanzania, where dozens of people have been killed in skirmishes with security since it opened in 2002.

Stubbs says that human rights matter but they are not an exclusionary point for Simplicity.

There are “a whole bunch of companies which have employment policies which could be seen as a human rights issue and it's too hard to draw the line on that,” he told BusinessDesk.

About 48 percent of Simplicity's KiwiSaver growth fund with $509.8 million under management and the same proportion of its non-KiwiSaver growth fund with $132 million of assets are invested in Vanguard’s ethically conscious share fund. About 0.084 percent of the Vanguard fund is invested in Barrick, giving Simplicity’s two growth funds a combined exposure of about $280,000. The firm’s conservative and balanced funds are also exposed to a lesser degree.Vanguard’s fund, in turn, tracks a FTSE-developed index which the investment management company said it had no control over.

A Vanguard spokeswoman said no single fund can meet diverse needs and that its ethical index fund reflected some of the most commonly valued sector exclusions.

Barrick was ruled out by the New Zealand Superannuation Fund back in 2013 on human rights grounds. It sold some $1.82 million of shares in the mining firm.

The mine's chequered history returned to the spotlight last month when an investigation by the Freedom Voices Network's Forbidden Stories collective found low level violence persists at the site, despite efforts to improve its systems, and environmental contamination remains an issue.

And earlier this month, the Tanzanian National Environment Management Council ordered the mine to stop using a tailings storage facility, saying the operator failed to contain and prevent seepage.

The North Mara mine is currently operated by London-listed Acacia Mining, although Barrick is in the process of buying the 36 percent of Acacia it doesn't already own.

Simplicity's Stubbs said he had not done much research into Barrick Gold, adding that his firm did not have the capacity to research every single holding that it had into different companies.

“We don’t have the resources internally to research it and nor do we benchmark against what NZ Super Fund sees as good or bad,” he added.

“It isn’t perfect in the eyes of everybody, there is always something.”

While approaches may differ, the level of responsible investment in New Zealand has increased as the market matures.

In calendar 2018 investment levels nudged up 2.5 percent to $188 billion, according to a July report from the Responsible Investment Association of Australasia.

The increase compares with a gain of 39.7 percent in 2017 at $183.4 billion, and an even bigger 66.2 percent boost the year before to $131.3 billion, the association's review of 46 New Zealand financial institutions found.

Tags: responsible investing Sam Stubbs Simplicity