The NZ government could force the Accident Compensation Corporation (ACC), New Zealand’s largest institutional investor, to sell down about NZ$1 billion of fossil fuel-related investments, a parliamentary committee concluded last week.
In a thinly veiled threat, the ‘Education and Workforce Committee’ review of the ACC ethical investment policies says the NZ$45 billion (A$42 billion) fund has an obligation to use its “substantial market power and influence” to take more action on climate change.
“At present, the decision about divestment from fossil fuels presently rests with the ACC Board to take into account all of the above, and our ‘reputation as a responsible member of the world community’,” the committee report says.
“Given Cabinet Ministers and the Prime Minister herself have all stated with regards to climate action, and particularly the Zero Carbon Bill that New Zealand’s role is to lead, it would make sense that we also lead the world in the next phase of divestment and ‘decarbonisation’.
“If the Government wishes to direct ACC to do so, it is entirely within its power under the Crown Entities Act 2019.”
In fact, Chlöe Swarbrick, the Green Party member of the committee chaired by the National Party’s Parmjeet Parmar, expressly advocates for “such action in the face of the climate crises”, the report says. However, the National Party minority view supports “the operational independence of ACC and the ethical investment policy that ACC currently has”.
“While the Minister of ACC does have the power to make a ministerial direction under the ACC Act, we are not aware that this has occurred since the scheme has been in operation, or if it has occurred, it is very rare,” the National Party statement says.
Whether the government does take the extraordinary step of intervening directly in the ACC fund’s investment decisions remains to be seen. But it wouldn’t be the first time a NZ government has put pressure on its allegedly arms-length sovereign wealth funds to change investment strategies.
For example, in 2010 the-then finance minister under a National government, Bill English, directed the NZ Superannuation Fund (NZS) to give more weight to local investments.
The NZS, of course, was compelled to respond to the not-so-subtle political interference in its asset allocation process, noting in a letter to the minister that “in response to your directive, we put in place a number of structures and initiatives to identify and access value adding investments in New Zealand”.
Meanwhile, the ACC’s more interesting decision to outsource a NZ$1.5 billion-plus inhouse global equities mandate to long-time chief investment officer, Nicholas Bagnall, moved a step closer to reality.
Last week the Te Ahumairangi Investment Management boutique was formally registered with the Companies Office, naming Bagnall as sole shareholder and director. Te Ahumairangi Investment Management is expected to be fully operational by next March.
– David Chaplin, Investment News NZ.