KEY POINTS:
Some call it ethical investing, others term it socially responsible investment. Either way, the concept has sprouted wings and is no longer the preserve of environmentalists and pacifists. Reason enough, perhaps, for a Prime Minister to embrace the feel-good factor by expressing her abhorrence of taxpayer money being invested in tobacco companies by the New Zealand Superannuation Fund.
On one level, Helen Clark chose wisely. Tobacco is an easy target. Its use is unacceptable to many people and runs counter to the Government's health priorities. On another plane, however, she succeeded only in pointing to the complicated issues raised by ethical investing. The use of tobacco remains legal and Government funds are swelled by taxes from its use. Does not a certain fuzziness, not to say hypocrisy, hover over any condemnation of this part of the Super Fund investment strategy?
That, however, is only the tip of the ethical investment conundrum. The Prime Minister alluded to this when she referred to the length-of-bow problem raised by companies such as Boeing and Rio Tinto. Aircraft-maker Boeing also services the United States' intercontinental ballistic missile arsenal while some Rio Tinto mining operations have enraged environmentalists. But these are just part of those companies' array of activities, which, in the case of Rio Tinto, includes the Bluff smelter.
Strict application of an ethical policy would, therefore, rule out investment in a large percentage of the world's biggest multinational companies. It would also eliminate a wide sweep of activities. Why stop at tobacco manufacturers, companies involved in nuclear-weapons production or armament-makers? Why not also ban investment in companies involved in the likes of gambling and liquor or those that abuse animals. Even the pharmaceutical company that does not experiment with animals may not be immune. Does its soap not use palm oil, thereby contributing to the clearing of tropical rainforests?
For these reasons, the board overseeing the Super Fund has, quite sensibly, declined to be a moral arbiter. It bases investment decisions on what is legal under New Zealand law and the content of international pacts. Pursuing political issues of the day, many of which are fleeting, would not only be vexing but distract from the long-term task of investing Crown money for the benefit of all New Zealanders. If the board needs room to manoeuvre, its mandate also includes avoiding "prejudice to New Zealand's reputation as a responsible member of the world community". Already, it has withdrawn investment from companies involved in selling whale meat and producing land mines.
The Government recognised such factors when it placed the Super Fund at arm's length. It also knows that, the Prime Minister's tilt at tobacco companies notwithstanding, the complexity implicit in ethical investing is best avoided. It is, therefore, happy to utter support for Maryan Street's Ethical Investments Bill, knowing all the time it is unlikely to be drawn from the ballot. Any serious intent would, as the Greens suggest, have prompted Government legislation.
The Super Fund board, for its part, seems increasingly ready to buy into ethical investing. Aside from acting over whaling and land mines, it has become a founding member of the United Nations Principles for Responsible Investment. This suggests it may also be being seduced by the concept's feel-good factor. Before going further, the board should ponder the long-term implications and complications. If it does not, it, like the Prime Minister, will soon be trying to disentangle the knots created by the likes of Boeing and Rio Tinto.
