Fund Managers Responsibility - Call to Action

The interim Parliamentary report on Rio Tinto’s destruction of 46,000-year-old rock shelters at Juukan Gorge, sacred to the Puutu Kunti Kurrama and Pinikura peoples, has just been published. It opens with two words: “Never again”. This is a scathing report.

“Rio Tinto’s role in this tragedy is inexcusable. Rio knew the value of what they were destroying but blew it up anyway.”

The inquiry is likely to result in a important changes to protect Aboriginal rights and better regulate mining companies. The fund managers also took action after the evidence became impossible to ignore – they fired the CEO and several senior executives.

But what did those investors do to prevent this and other mining company abuses that have been revealed in the inquiry?

Mining companies have escaped accountability for too long. When New Zealanders put their money into a KiwiSaver or investment fund, we expect the fund managers to govern the companies on their behalf and prevent violations such as this.

We need fund managers to take those responsibilities seriously. Mindful Money is developing a report to be published in 2021 on which investment funds are using their governance powers to prevent harm and ensure companies are upholding human rights and environmental norms.

Sustainability pays.

The evidence is piling up. KiwiSaver and other investment funds that invest ethically earn returns that are as high or higher than conventional funds. Because they manage the risks from climate change, social harm and environmental damage, the risk is also generally lower.

It is good to see that most New Zealanders now realise this. The recent survey of the New Zealand public undertaken by Mindful Money jointly with the Responsible Investment Association of Australasia showed that 78% of the public understand that ethical funds perform better over the long term.

Some news this week provides a snapshot of why this is the case. 

The share prices of renewable energy companies such as Meridian have risen sharply as international investors recognise the risks of climate change and look for clean energy producers. 

The potential sale of Tilt Renewables is another local example.

The Institute of Directors is doing more to inform its members about the opportunities from climate action. Their recent article cites international research showing that European corporations are realising significant operating cost savings from comparably modest spending on emissions reductions. Investments last year in low-carbon projects such as renewables and energy efficiency were expected to net a savings of US$20 for every metric ton of carbon dioxide equivalent avoided.

Our agricultural sector has far more to gain than lose from climate action. 

Synlait Chief Financial Officer reported that big food brands were driving towards zero carbon targets and are in a global hunt for the least-carbon intensive products that they can buy to support inputs into the brands that they market to consumers. This can create huge opportunities for New Zealand food producers. Synlait was the first dairy company to commission an electrode boiler at a liquid milk plant. In addition to satisfying its global customers, Synlait reports that the investment stacks up on a 10-year business case.

The realisation is finally starting to sink in. There are already many opportunities for business to reduce their emissions and do well financially. 

That means investment funds investing in those companies will earn good returns. 

It pays to invest ethically.