New Zealand Supperannuation Fund Battles Slack for Investing in 'Illegal' Cluster Bombs

(August 30, 2011) — The New Zealand superannuation fund is defending itself against cluster bomb claims.

Questions into the asset allocation of the fund revealed that it currently has $2 million invested in five companies involved in the production of cluster bombs, despite the scheme’s promises in December 2008 to disassociate itself from such companies. The companies are GenCorp, Kaman, Saab AB, Tata Power and Zodiac Aerospace.

“Profiting from the production of cluster munitions is immoral and an embarrassment to the reputation of the Government’s Superannuation Fund,” said Green Party Co-leader Dr. Russel Norman in a statement. “The Fund is likely to be in breach of New Zealand’s obligations under the Cluster Munitions Convention and must divest from these companies immediately.”

Previously, the Superannuation Fund has been found to be investing in the whaling and tobacco industries. Currently, it invests more than $93 million in companies other sovereign funds have chosen to divest from under the same United Nations guidelines for responsible investment, according to the Green Party.

In response to the allegations, the New Zealand scheme issued a statement saying: “We continue to research whether a number of companies in which we are invest are involved in the manufacture of Cluster Munitions or the key components of Cluster Munitions. As is often the case, there is doubt and disagreement about key facts, among investors like us who research these issues. Careful and ongoing analysis is therefore required. The Guardians are conscious that the policy decisions we make under our Responsible Investment Framework must be enduringly justifiable from both a commercial and a responsible investment perspective. We therefore make a decision to exclude, or otherwise, only on the facts as we understand them first-hand. If we conclude on the facts that companies in which we invest are in breach of our exclusion criteria, we will exclude.”

The scrutiny faced by New Zealand’s superannuation fund is similar to calls for more responsible investment practices elsewhere. For example, doctors in the UK have recently called for local government pension funds to leave their investments in tobacco companies, naming the investment as an “unethical” practice and a “destructive industry.”

“If it were my pension contributions being invested in an industry whose only product line killed people in the numbers that die from tobacco, I would be absolutely horrified,” Dr. Gabriel Scally, Regional Director of Public Health for the South West, told The Observer newspaper. “As a doctor I think it would be completely unethical to have any part in it.”

According to the Guardian, Cornwall council has the highest amount invested, with £24.5 million in Imperial Tobacco, Altria Group and British American Tobacco. Devon County council has £20.8 million, while Gloucestershire holds £16.8 million and Dorset has £14.7 million.

About £1 billion in such investments are present in councils across England.

Other pension schemes around the world have made efforts to serve as role models for socially responsible investment. In January, for example, Norway blocked 17 tobacco companies from its sovereign wealth fund, Europe’s biggest equity investor. The fund blacklisted Philip Morris, British American Tobacco, Imperial Tobacco, Altria, Reynolds American and Japan Tobacco, among other tobacco companies, after the Norwegian finance ministry ruled that the firms violated the fund’s ethical guidelines.