Clearing bombs, clearing Kiwisaver

A couple of things came up yesterday related to bombs – the Police have indicated there is no evidence indicating that Kiwisaver funds illegally invested in arms manufacturers.

At about the same time John Key announced giving $11.5 million to Laos to help them claim old bombs.

Stuff: Prime Minister John Key pledges $11.5m to help clear unexploded munitions in Laos

New Zealand has contributed $11.5 million to help support clearing unexploded munitions in Laos.

Prime Minister John Key made the announcement in Vientiane where he is attending the East Asian Summit and met with Laos Prime Minister Thongloun Sisoulith.

“Laos is the most heavily bombed country on earth by head of population and is still clearing around 80 million pieces of unexploded munitions left over from the war in Indochina during the 1960s and 1970s,” Key said.

For 20 years New Zealand has been helping with the clean-up.

“We still have about 40 or 50 people a year being either killed or losing limbs by these bombs going off,” he said.

US President Barack Obama announced on Wednesday a further $90m over a three-year period to speed up the process of clearing Laos. 

Large areas, often including schools, currently have to be cleared in order to diffuse a bomb, which can cause a large amount of damage.

However, New Zealand technology will be trialled and used over the next couple of years to melt casings “without having to dig up or explode each piece,” Key said.

It’s good that New Zealand is helping Laos clean up, but it’s a huge long term job.

In the meantime:

Kiwisaver / Cluster Munitions Act assessment complete
Thursday, 8 September 2016, 12:34 pm
Press Release: New Zealand Police
Police and FMA complete assessment – Kiwisaver / Cluster Munitions Act
The Police, in consultation with the Financial Markets Authority (FMA), have completed an assessment into whether the Cluster Munitions Act (“Act”) is likely to have been breached by New Zealand KiwiSaver fund managers.

A feature of fund management is the fact that fund managers generally buy their securities on traded markets, so these are shares traded between shareholders as opposed to providing funds to the companies that produce these weapons.

Additionally, New Zealand fund managers also place money with offshore fund managers, who may undertake share trading on overseas markets, rather than the New Zealand fund managers investing directly.

There are significant threshold issues with regard to establishing breaches of the Act, and at this stage there is no evidence to indicate offending.

Should there be any new evidence that comes to light this will be assessed and acted on as required. 

With investment funds investing in investment funds, and with often convoluted  company ownership, it can be difficult ensuring that investments are ‘ethical’.

I certainly don’t want to be investing in cluster bomb manufacturing, or any bomb manufacturing. But it’s more of a ‘feel good’ stance than effective, if no New Zealander invested in any arms manufacturer, directly or indirectly, it would do nothing to stop man made carnage.

It also gets complicated when a company may have an association with the manufacture of arms but also manufactures things that are useful and ‘ethical’.

And it gets very complicated when you consider the reality that arms are needed to defend as well as to attack, and when bad people attack someone has to defend with something.

Thin end of the ‘ethical investment’ wedge

Last week it was reported that some Kiwisaver funds invested in munitions and tobacco companies. This prompted a lot of comment about ‘ethical investments’.

An ODT editorial looks at Socially responsible investments:

Last week, Commerce Minister Paul Goldsmith said in Parliament there were indications several KiwiSaver providers had broken strict laws banning investments in cluster bomb makers.

A newspaper investigation analysed more than 100,000 individual assets held in nearly 500 KiwiSaver funds looking for 169 companies blacklisted by the New Zealand Superannuation Fund.

The analysis found half of KiwiSaver providers — mostly smaller boutique providers — have avoided blacklisted investments, but some people were unwitting investors in big tobacco companies and makers of banned weapons.

The investigation found three KiwiSaver providers have made investments worth a total of $2.3 million in a trio of United States companies blacklisted by the New Zealand Superannuation fund due to their production of cluster bombs.

The latest KiwiSaver report shows more than $28 billion is invested in KiwiSaver by 2.5 million New Zealanders.

Although the amount invested is a tiny percentage of  total KiwiSaver funds, it is still unacceptable some funds have broken the law.

The KiwiSaver providers should have been more careful to adhere to the legislation specifically forbidding investments in such companies.

Yes, if it’s illegal to invest in a certain type of business it is simply unacceptable.

But it can get tricky because many investments are not simple and easy to identify. The investigation found that Kiwisaver funds from the ANZ and ASB invested in other funds that invested in munitions and tobacco companies.

And it can get more convoluted. The Fisher Fund invests in the ANZ in Australia, so could be seen to be (very) indirectly linked to cluster bomb manufacture.

But the rest of the problem becomes murkier.

It is still legal to smoke in New Zealand and there will be some KiwiSaver investors who are relaxed about their funds being invested in tobacco companies.

In total, New Zealanders were found to have $102 million in tobacco companies, a small proportion of the total amount invested.

I certainly wouldn’t choose to invest in tobacco. But would it matter if the fund I invested in indirectly had a small amount in tobacco? It would make no difference to tobacco production or use if I was minutely and remotely connected or not.

The Government has rightly said it was unlikely to further regulate the KiwiSaver sector and the choice of the fund — and where to draw lines on what was an acceptable investment —  was up to individuals.

This stance has outraged Opposition MPs who want the Government to step in to tell the funds where they can and cannot invest.

Telling New Zealand KiwiSaver providers where to invest is a thin edge of something rather larger.

And that wedge was given a nudge last week. For example Kevin Hague tweeted “No doubt you’re shifting your KiwiSaver account to a company that doesn’t invest in cluster bombs. When you shift, think fossil fuels too”.

Currently, about 50% of New Zealand investors hold shares in Australian companies, including mining companies dealing in fossil fuels and extractive industries such as uranium, a key component of nuclear energy generation.

If all investment ceased in fossil fuel and other extractive industries it would create chaos around the world. While natural energy like wind and solar is great we are still very reliant on oil.

No government has the right to decide whether New Zealanders can invest in liquor or tobacco companies.

It is the individual’s responsibility to ensure they ascertain where their money is invested.

But the Greens seem to want to hammer the ‘ethical investment’ wedge. Julie Anne Genter:

Govt must set the ethical standard on KiwiSaver investments

The Government needs to set higher ethical investment standards for its default KiwiSaver providers, the Green Party said today.

“Profiting from the production of cluster munitions, landmines, and nuclear weapons is immoral, and most Kiwis wouldn’t want their Government directed savings invested anywhere near these companies,” Green Party finance spokesperson Julie Anne Genter said.

“Default KiwiSaver Funds need to be legally invested, at a minimum, and preferably ethically invested, so that New Zealanders have the best choices over where their money goes.

Obviously investments need to be legal. But ‘ethical’ is quite different.

New Zealanders already have the choice where their Kiwisaver funds are invested. As they should.

But I have concerns about Government setting ‘higher ethical standards’ for investments.

An interesting New Yorker article on whether divestment (ethical reinvestment) makes any difference – DOES DIVESTMENT WORK?

And there can be a costly downside as the ODT reports in City pays cost for divesting

Some of the Dunedin City Council’s divestment decisions have cost the city, it was revealed at yesterday’s council finance committee meeting.

The council voted last May to scrap any investments the fund had in the munitions, tobacco, fossil fuel extraction, gambling or pornography industries and to bar future investment in those industries.

The fund had produced $783,000 in profit during the eight months to February 29. However, this was $1.657 million down on the budgeted $2.44 million profit.

Some of the unfavourable variance was because of divestment losses, Mr McKenzie said.

The Dunedin City Council has a strong green lobby, and they succeeding in forcing divestment from companies they considered to be unethical. At a cost.

Kiwisavers should have choice. That could cost them. Apart from ensuring illegal investments are avoided the Government should not dictate what we can invest in.