Responsible Investor

The importance of responsible investment: Views from the New Zealand Superannuation Fund

How New Zealand runs its NZ$13.5 bn (€6.8bn) national pension fund to protect the country’s reputation.

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 additional factors are often captured under the banner of “responsible investment”. Responsible investment is a rapidly maturing activity, driven by growing expectations from beneficiaries and a changing interpretation of fiduciary responsibility. The Guardians of New Zealand Superannuation must invest the New Zealand Superannuation Fund in a manner that adopts best-practice portfolio management and avoids prejudice to New Zealand’s reputation as a responsible member of the world community. Our governing legislation also requires us to adopt ethical and voting policies, which are brought together by our responsible investment policy. It is a core investment belief of the Guardians that environmental, social, and governance issues can affect investment returns over the long term, and we therefore view responsible investment to be part and parcel of best-practice investment management. Like many countries around the world, New Zealand has an ageing population, with the number of retired people expected to double by 2050. The Government set up the New Zealand Superannuation Fund in 2003 to help fund future New Zealand Superannuation payments which

would otherwise place an unfair and unsustainable burden on the next generation of taxpayers. The New Zealand Superannuation Fund has over 3000 holdings in its portfolio which are selected by external managers. Many of these investments give rise to complex social, environmental or governance concerns.
The Guardians have developed a responsible investment framework, based on sound shareholder principles, to address these often complex issues. A first step has been to build a sound governance foundation for this framework. The Guardians established a Board-level Committee to develop and oversee the implementation of the Responsible Investment Policy. Responsible investment requirements are included in the terms of reference for the internal management, investment, and communications committees. We are required to report on our progress to the New Zealand Minister of Finance and we also report publicly on our activities. As a young fund, the responsible investment framework provides the basis for our future work-stream in this area.
The main benchmark for our framework is the United Nations Principles for Responsible Investment (UN PRI). The Guardians are a founding signatory to this effort, which at only 18 months old, is now supported by more than 300 investor signatories representing over US$10 trillion in assets. The UN PRI is a potentially powerful

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