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NZ Superannuation Fund - Source: ONE News -
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The Prime Minister does not believe the New Zealand Super Fund is failing to do due diligence.
His comments follow claims from the Greens that the Fund is investing in cluster bomb manufacturers.
Answers to written parliamentary questions show the Super Fund has $2.5 million invested in five companies involved in the production of cluster bombs.
The companies are GenCorp, Kaman, Saab AB, Tata Power and Zodiac Aerospace.
The investment is the latest in a string of allegations over unethical investment revealed by the Greens.
Earlier this month they revealed the fund had 80,000 shares in Shanghai Industrial Holdings, whose subsidiary Nanyang Brothers Tobacco is a manufacturer of tobacco.
The Fund had not realised the tobacco connection because the
subsidiary is unlisted and therefore untraded, and the stock was
bought on a passive basis - where investments are made based on a
company's prominence rather than being hand picked.
The Greens also said the Fund invested in tobacco companies, arms
producers and companies with serious human rights breaches that a
Norwegian fund had blacklisted.
Co-leader Russel Norman said investment in cluster bomb
manufacturing would likely contravene the Government's commitments
under the international convention on cluster munitions.
But John Key said the fund is following the right procedures.
"The act is quite clear when it comes to the investments for the
New Zealand Super Fund," he said.
"Their responsibility, what they've agreed morally is not to invest
in companies which undertake what they believe to be immoral
activity like cluster bombs.
"So where they have the ownership of shares in companies that
do undertake things like the manufacture of cluster bombs, they
sell those shares and so they should."
Key said it was his understanding the fund buys "index
shares".
"So every single share on the stock exchange will represent what
the index is doing. They then go and run a process. That's what
they're doing at the moment.
"They do a more thorough investigation if they find those companies
are undertaking activities they don't like and sell those
shares."
Guardians of New Zealand Superannuation are also denying any
guidelines have been broken.
It said the companies were held "passively" and they move in and
out of the fund based on its market capitalisation rather than
through active "stock picking".
"We note that the combined value of the holdings is a small
fraction of 1% of the Fund," the Guardians said in a
statement.
But profiting from cluster munitions was "immoral and an
embarrassment", Norman said.
"I think the average New Zealander would be shocked to know their
retirement savings are being invested in cluster bombs."
Repeated oversights by the Super Fund led to questions about its
ethical investment guidelines, Norman said.
The Fund has a self-imposed ethical investment policy which
prevents investment in companies involved in tobacco production,
whaling, cluster munitions and the manufacture
and testing of nuclear explosive devices.
Fund spokesman Paul Gregory said they had been aware that this
situation could happen and had already begun work to make the
Fund's screening process more refined.
A new list of banned companies was currently being finalised and
would be made public at the end of the month.
