General policy statement

The purpose of this Bill is to provide a framework for ethical investment mandates for the New Zealand Government’s Crown Financial Institutes (CFIs). Currently there are five CFIs, namely the New Zealand Superannuation Fund, the Government Superannuation Fund, the Earthquake Commission, the Accident Compensation Corporation, and the National Provident Fund.

The framework set out in the Bill comprises criteria that are consistent with internationally recognised norms and conventions for ethical and socially responsible investment. While the CFIs do not directly control their investments, this framework will require them to instruct their fund managers to invest according to the criteria described in the Bill. Significantly, these criteria require funds to be invested in ways that are not inconsistent with the core business of the CFI.

In addition, certain reporting requirements are described. These maintain transparency around investments.

Definition

An ethical and socially responsible organisation is one that acts in an ethical, socially responsible, environmentally sustainable way, treating its stakeholders fairly. Stakeholders include owners, members of the governing body, management, staff, subsidiaries, contractors, suppliers and distributors, customers, clients, and the local community. From an environmental viewpoint, its ecological footprint should be neutral or not harmful in its use of or impact on resources such as water, air, land, energy, and materials. The social component should include human rights (as described in the UN Declaration of Human Rights), and use of labour (including health and safety and fair employment practices as described in ILO declarations).

An ethical and socially responsible organisation maintains good governance, fair benefits, and rewards of the organisation’s activity to all stakeholders, and financial and ethical integrity and transparency. This includes accurate and accessible annual financial and performance reports, and truthful advertising and promotion. It also requires socially responsible consideration of supply and distribution chains, production methods, and the impact on local communities.

In this immediate context, it entails the CFIs observing criteria for investment that are socially responsible, environmentally sustainable, and not inconsistent with the aims of their core business.

CFIs and their governing legislation

The relevant organisations (CFIs) and their respective legal frameworks originate from—

• (a) the New Zealand Superannuation Fund (New Zealand Superannuation and Retirement Income Act 2001):

• (b) the Government Superannuation Fund (Government Superannuation Fund Act 1956):

• (c) the Earthquake Commission (Earthquake Commission Act 1993); Ministerial Direction, 30 October 2001:

• (d) the Accident Compensation Corporation (Accident Compensation Act 2001):

• (e) the National Provident Fund (National Provident Fund Restructuring Act 1990) and the trust deeds that govern the 14 individual Funds.

The nature of the current legal framework around the Earthquake Commission and the National Provident Fund investment funds means that only organisations (a), (b), and (d) are amended by this Bill.

The Bill is divided into three Parts, each amending an individual CFI’s governing legislation to ensure that—

• CFI investment policy must be consistent with and governed by ethics that promote socially responsible and environmentally sustainable economic development:

• CFI investment policy must take into account international norms, conventions, declarations, covenants, and treaties already supported, signed, or ratified by the New Zealand Government:

• CFI investment policy must do nothing prejudicial to New Zealand’s reputation as a responsible member of the world community.

Reporting and disclosure requirements

• CFIs will be required to report annually against the investment policy criteria outlined above.

In their annual reports, CFIs must disclose the extent (if at all) to which social, ethical, and environmental considerations and labour standards are taken into account in the selection, retention, or realisation of any of their investments.

International norms and treaties

The following are examples of international norms, treaties, and conventions, which are relevant to criteria governing socially responsible and environmentally sustainable investment. This list is indicative and not exhaustive:

• Universal Declaration of Human Rights 1948:

• International Covenant on Civil and Political Rights:

• International Covenant on Economic, Social and Cultural Rights:

• International Convention on the Elimination of all forms of Racial Discrimination:

• Convention on the Elimination of all forms of Discrimination against Women:

• Convention on the Rights of the Child:

• Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment:

• Declaration on Fundamental Principles and Rights at Work (1998) – ILO:

• Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (1997) – ILO:

• Guidelines for Multinational Enterprise (1997, 2000) – OECD:

• Voluntary Principles on Security and Human Rights:

• UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights – UN:

• CHR resolution 2005/69 – UN:

• Environmental Treaties covering Agriculture, Biodiversity, Climate Change, Conservation, Environment, Fisheries and Trade.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 is the commencement clause and provides that the Bill comes into force on the day after the date it receives the Royal assent.

Clause 3 sets out the purpose of the Bill.