The NZ Superannuation Fund (NZS) has been empowered to take outright control of underlying businesses after new legislation passed unopposed through parliament last week.
Under the New Zealand Superannuation and Retirement Income (Controlling Interests) Amendment law, currently awaiting Royal Assent, the now $75 billion plus fund would have more flexibility to pursue direct investment opportunities at home and offshore.
However, the official preamble to the legislation notes the broader NZS shopping menu would apply “particularly in New Zealand”.
“This could attract institutional investors who are comfortable with the Guardians’ due diligence practices, and deepen capital markets for domestic transactions, particularly as the Guardians look for scalable investment opportunities such as strategic infrastructure,” the explanatory note says.
Finance Minister Nicola Willis told parliament early in May as the bill entered its third, fish-interrupted, reading that the legislation does feature guardrails requiring the NZS to “include in the statement of investment policies, standards, and procedures the details of a governance framework for the implementation and operation of controlled entities”.
“As I noted in the committee of the whole House stage of the bill, I have been satisfied that the Guardians are well advanced in their thinking about how they will adopt these practices upon the passage of the Act,” Willis said at the time.
She also said the-then draft law “does not alter the Guardians’ independence from political influence in relation to investment decisions” in the third reading, part one on May 9 before parliament changed tack to consider a fisheries report.
But in a meandering discourse taken up again on May 28, Green MP Celia Wade-Brown highlighted some appetite for greater political control over NZS investment calls.
“… I would like to disagree with the points made about leaving it totally up to the Guardians. At the moment, there are a number of existing excellent exclusions,” Wade-Brown said.
“… These are exclusions that exist now, and we would have liked to have added more exclusions. That is absolutely the topic of the bill, and it could have been the topic of improved amendments.”
The bill itself has no provisions relating to exclusions or the like but the explanatory note says the NZS “has a reputation for being world-leading in environmental, social, and governance (ESG) integration and has a strong commitment to using its influence as a shareholder to encourage companies to manage and report on their ESG risks”.
Following an offbeat diversion into bubble-bath metrics courtesy of Ryan Hamilton, the National MP for Hamilton East (no relation), all MPs voted in favour of the legislation.
But there could be a sequel.
Willis said earlier in May that the law “provides for the amendments contained within it to be reviewed within 10 years as part of the regular five-yearly statutory reviews of the fund”.
“… I think it is a sign of the maturing nature of the fund—and actually of New Zealand’s investment context—that we have seen this adaptation occur, and it is not impossible to envisage that future tweaks could be made again in future.”