Weapons, gambling, cigarettes and fossil fuels are out – and now the Auckland Council is moving to pull its investments from companies that sell high-sugar products.
The Council’s $230 million ‘Diversified Financial Asset Portfolio’ will be divested of controversial stocks.
It could be closed entirely and the money used directly to build city infrastructure. The fund is already set to fall in value this year to $130m as councillors look for rainy day money.
The asset sale – which is what a selling up of the portfolio would be – could make the new ethical principles moot.
The council’s Finance and Performance Committee on Tuesday received a report commissioned last year on ethical investing. It recommended excluding investments in “certain activities and industries.”
Top of the list was the manufacturing or development of controversial weapons, tobacco manufacture, fossil fuel production, and generating revenue from operating gambling machines. The inclusion of these activities confirms the council fund is indirectly invested in such businesses.
It is evidently not, however, in two controversial areas identified in public surveys – whaling and nuclear power – or other activities such as pornography distribution, selling fur products, animal testing and genetic engineering.
There remains concern about possible investment in “high-sugar, low-nutrient” products and beyond the direct exclusions, investment managers will be asked to monitor and screen out sugar businesses.
The Council says the sugar measure is consistent with “broader initiatives of the Auckland Plan”, which talks of improving liveability and social outcomes, among other things.
The committee chair, Ross Clow, said there were strong feelings on the ethical investment issue. “It has been clear for some time that our policy should meet certain ethical standards and changing the policy to exclude investments in some areas is a good outcome for all.”
All except the fund itself. It had already been cut by $100m last year and will lose a further $100m this financial year, even before investment managers have to switch monies out of the ethically unwelcome companies.
Council officials asked for the fund’s future to be reviewed by June, given “the need to release capital to fund infrastructure development”.
The Diversified Financial Asset Portfolio was overseen by Auckland Council Investments Ltd until two years ago, then the Council’s internal treasury department.
A report to the council from a Canberra-based researcher, CAER, said New Zealand’s largest “responsible investment asset manager” is the Accident Compensation Corporation, followed by the NZ Super Fund, with negative screens across their funds to exclude unacceptable industries and companies.
It said the Auckland Council had a strong stance against obesity and high-sugar, low-nutrient products.
“In 2016, as a show of leadership the council dropped sugar-sweetened drinks from vending machines at council-run leisure centres, which means 340kg of refined sugar not being distributed from vending machine sales a year.
This latest sugar restriction is not an out-right ban, like tobacco, weapons, gambling and fossil fuels, however.
CAER recommended instead that fund managers be required to explain why they invest in such companies. This would include “an assessment on how the company responds to the risk of obesity” – recognising their role in creating a fatter population and addressing nutrition labelling and marketing to children.
Clow indicated the ethical divestments might be short-lived. “Given that we have already been increasing the divestment of the portfolio over the past two years and there will only be around $130m left, it is right to review the value of the portfolio and decide if the money could be better used to invest in infrastructure across the city.”
