The almost $60 billion NZ Superannuation Fund (NZS) is poised to roll-out its revised responsible investment strategy in the wake of a lengthy review.
According to a NZS spokesperson, the responsible investment (RI) review – flagged in the fund’s 2020 annual report – was aimed at refreshing the overarching strategy set more than 10 years ago.
“The goal was to develop an RI strategy that is fit for the future, feasible to implement, and orientated to maintaining our ‘social licence to operate’ over the medium to long term. The review covered global trends and developments in responsible investing, stakeholder expectations, ESG performance of the portfolio and positive impact investing,” the spokesperson said. “We’re working through details and hope to make announcements about our updated strategy in due course.”
Last week newly appointed NZS chair, Catherine Drayton, told the parliamentary Foreign Affairs Select Committee that the organisation’s current RI approach had stood up well in several external reviews and a recent High Court case.
However, Drayton said: “That’s not to say issues will never arise in a $59 billion portfolio that invests in thousands of stocks to get broad exposure to global markets and wide diversification.
“We are looking to meet the different parts of our mandate through getting broad diversified global equity exposure at low cost, in line with globally accepted principles of best practice portfolio management, while being careful about the application of our responsible investment framework. This involves proactively thinking about particular categories of exclusion, and responding to issues arising with individual companies.”
Earlier this year, for example, the NZS cut several Israeli banks from its portfolio, citing their involvement in funding development in Palestine ‘occupied territories’. The NZS move sparked a challenge from the local Israel Institute, which foisted the fund with a heavy administrative task, as well as diplomatic displeasure – and possibly setting the template for ‘activist’ pressure against all sovereign wealth funds.
In a release last week, NZS also revealed it had recently signed up to an institutional investor initiative backing human rights in the increasingly troubled Myanmar.
Signatories to the initiative – led by The Storebrand Group (Norway), Domini (US) and the Heartland Initiative – commit to: “… addressing human rights risks in our portfolios, and specifically in the case of conflict-affected Myanmar, we expect companies to uphold their corporate responsibility to respect human rights by undertaking enhanced due diligence to address and prevent human rights harms and in so doing, mitigate risks associated with such violations.”
The Myanmar declaration focuses investor efforts on identifying portfolio companies that could be contributing to human rights abuses in the country or “may enrich” those associated with the military regime responsible for staging a coup this February.
Matt Whineray, NZS chief, said the signatories, representing about US$4 trillion in assets, would initially target engagement with firms caught in the controversy.
“Rather than automatically excluding companies, our long-standing preference is to engage them to encourage improvement in their policies and practices, which is what we are doing in Myanmar,” Whineray said in a statement. “Exclusion is a last resort that we may choose to undertake if we believe engagement will be ineffective or has proven to be ineffective.”
Drayton told the parliamentary committed that NZS typically preferred to engage on controversial issues along with other investors and using “specialist service providers”.
“You will appreciate that with such a large portfolio, we need clear established priorities, processes and decision making criteria to ensure we act in a consistent manner when considering the many issues that arise,” she said.