Anne-Maree O'Connor: Social and ethical attitudes crucial

Page 1 of 2 View as a single page 5:00AM Monday Jan 14, 2008
Anne-Maree O'Connor

During recent years, investors have increasingly considered environmental, social, and broad governance issues in their investment decisions, over and above a narrow focus on financial return.

These factors are often captured under the banner of "responsible investment". This investor trend has paralleled consumer trends, where products and services are increasingly selected using factors other than just price, quality, or convenience.

Responsible investment is a rapidly maturing activity, and one that the guardians are taking notice of.

The guardians care about being responsible investors in part because of their governing legislation, which requires us to, among other things, avoid prejudice to New Zealand's reputation as a responsible member of the world community.

It is also a core investment belief of the guardians that environmental, social and governance issues can affect investment returns over the long term.

As the field of responsible investment matures, the guardians view it to be consistent with best-practice portfolio management.

We have made rapid progress towards being a leading authority in New Zealand on the issue, and are able to stand beside and influence our peers in the global investment community.

However, many issues need to be worked through in a principled and transparent manner. We are confident we are in control of the issues.

The New Zealand Superannuation Fund is a broadly diversified portfolio across global markets, encompassing at present over 3000 stock holdings valued at more than $14 billion.

The size of the fund and its diversification will continue to increase.

These stock holdings are selected largely by external managers contracted by us. As such, there is a constant stream of responsible investment issues that confront the guardians, ranging from company products and practices through to the location of firms and the performance of their suppliers.

In order to best meet our legal requirement and put our investment belief into practice, the guardians have developed a global best-practice responsible investment framework to assess these issues.

This framework is based on shareholder principles which guide our investment decisions.

The main benchmark for investor principles comes from the United Nations Principles for Responsible Investment. The guardians are a founding signatory to this effort, which is only 18 months old but is supported by more than 200 investor signatories representing $12 trillion in assets.

The principles are a potentially powerful catalyst for influencing corporate change, and focus on active ownership and integration of environmental, social and governance factors into investment management.