The government is pushing the Accident Compensation Corporation (ACC) to schedule an independent review of investments in line with other Crown Financial Institutions (CFI).
Unlike fellow CFIs – the NZ Superannuation Fund (NZS), the Government Superannuation Fund (GFS) and the National Provident Fund (NPF) – the ACC fund does not have a legal duty to commission regular third-party reviews of its investment operations.
But in the latest annual ‘letter of expectations’ to the now $50 billion plus fund published last week, Finance Minister Grant Robertson says the ACC should follow the example of the three other CFIs that “have a statutory requirement that periodic reviews take place to assess how effectively and efficiently the Board and the entity is performing its functions”.
“I consider this to be good practice and I would like you to work with officials to appropriately time and scope an independent review of ACC Investments in the coming years,” Robertson says.
In the 2022 missive, Robertson further urges the ACC board “to develop a culture that positively engages with my officials and recognise where a Crown perspective might be useful in the development of certain strategies”.
“For the avoidance of doubt, this comment is not intended to be at the individual investment level but should consider how the Board can bring all stakeholders on the journey where there is a significant change to investment strategy, policy or philosophy,” the Minister says in the letter. “I expect that you err on the side of openness if in any doubt about how to apply this expectation.”
Meanwhile, Robertson told the NZS board to keep up the good work in responsible investing, take a prudent approach in its new governance role with the Venture Capital Fund (now operating as NZ Growth Capital Partners) and push on with “commercially attractive opportunities to invest in New Zealand assets, including infrastructure, housing and climate-oriented investments”.
“The Guardians’ SuperBuild model could support both the New Zealand Super Fund and the Government’s mutual objectives,” he says.
Both the NPF and GSF attracted simpler specific instructions for the year ahead as Robertson suggested the former take care with asset allocation and the latter to “keep the Minister and officials informed of the progress made towards addressing recommendations made in the independent review”.
Consultancy firm Willis Towers Watson advised the GSF to upgrade some internal process among a raft of recommendations in its statutory five-year review of the CFI in 2021. The $5.2 billion GSF also commissioned a separate independent investment review in 2020 after a run of underperformance.
While the annual CFI letters from the Minister are typically filled with identical boilerplate governance guff – this year, for example, including a call for “robust ethical investment policies” and care when using derivatives – the government also singles out each institution to drive specific policies.
For instance, in previous editions the Finance Minister urged the ACC to slash its exposure to fossil fuel assets, which the fund has since complied with under new climate change targets.