NZ Kiwisaver retirement schemes invested in firms which make banned munitions

(Updates to include comment from Northrop Grumman.)

It’s emerged that at least three funds tied to New Zealand’s Kiwisaver retirement savings schemes are invested in companies involved in the manufacture of cluster bombs or anti-personnel mines – munitions that are banned by international treaty.

The companies in question are US defence firms General Dynamics and Northrop Grumman as well as Singapore Technologies Engineering. All three firms are excluded by the NZ$29.6bn (€16.9bn) New Zealand Superannuation Fund, the country’s leading responsible investor.

Launched in 2007, the Kiwisaver schemes permit any employed New Zealander over 18 to save up 8% of monthly gross pay for retirement. The schemes benefit from an employer top-up equalling at least 3% of pay and a signing bonus from the government.

Eight years since their launch, the schemes have taken in NZ$22.8bn in retirement assets which are managed in funds provided by an array of local banks. The funds range from vehicles investing in cash to growth funds that invest heavily in international equities.

Now a local newspaper reports that the growth funds offered by Westpac, the Australia and New Zealand Banking Group (ANZ) and the Bank of New Zealand (BNZ) have exposure to the three companies involved in the manufacture of cluster bombs and anti-personnel mines.Citing MSCI ESG Research, the Business Day newspaper said Westpac’s fund was invested in Northrop Grumman, which is helping to develop a new anti-personnel mine, and Singapore Technologies, known to be involved in making cluster bombs.

Northrop Grumman says in its 2014 Corporate Responsibility Report that it does not manufacture or otherwise work on antipersonnel mines, cluster munitions, depleted-uranium munitions, chemical or biological weapons. It won a contract from the US military in 2013 to develop an increment to the Spider ‘networked munitions’ system, which is operated by soldiers and which can be loaded with non-lethal canisters. The system is

Business Day also said ANZ’s growth fund was just in Northrop Grumman, while BNZ’s product had exposure to General Dynamics, which makes parts for a air-dropped cluster bombs.

In the prospectus for its Kiwisaver scheme, Westpac lists BT Funds Management New Zealand as the prime asset manager for the funds on offer. BT Funds, in turn, outsources some of the fund management to other firms like Harbour, Franklin Templeton, Wellington, MFS and Schroders. Asked to comment on MSCI’s findings, Westpac told Business Day: “We are making enquiries with our third-party investment managers to understand if it is possible to introduce restrictions regarding certain assets.” ANZ and BNZ, meanwhile, said the managers of their growth funds had assured them that neither Northrop Grumman nor General Dynamics were manufacturing the outlawed weapons – a claim that was refuted by MSCI. However, Westpac clearly states in the prospectus that the underlying funds do not follow a responsible investment strategy. Indeed, the New Zealand government has not required this from funds tied to the Kiwisaver schemes.