It is time for the Autorité des marchés financiers to do its duty to protect Kiwisaver investors
Opinion: The failure of the Financial Markets Authority to outline ethical standards for KiwiSaver funds should be of major concern to all New Zealanders concerned about their own safety and the safety of our country. Currently, the vast majority of KiwiSaver funds that claim to be ethical have invested in banks that provided $3.8 trillion to the fossil fuel industry between 2016 and 2020.
The authority says it cannot prevent these funds from misleading potential investors because it cannot define what is ethical. This is frightening in a world where the UN Secretary General has warned that due to greenhouse gas emissions the world is on the fast track to disaster.
There are a number of terms for ethical investing – socially responsible investing, environmentally responsible investing, responsible investing, ESG (environmental, social and governance) investing, sustainable investing – but confusion reigns over them. According to the Reporting Exchange, there were over 1,700 ESG-related guidelines globally in 2019.
The Securities and Exchange Commission recently acted against misleading ESG claims. She penalized BNY Mellon Investment Adviser, Inc. for misrepresentations and omissions regarding ESG considerations.
The law on the Autorité des marchés financiers stipulates that financial products and services require “fair trade” and includes the prohibition of any misleading or deceptive conduct. But when it comes to ethical investing, the authority says that values are subjective and constantly changing and therefore cannot define what an ethical investment is.
Yet New Zealanders are currently appalled by the atrocities in Ukraine where murder, rape, torture and other war crimes are being committed. The authority is unable to say whether these are wrong, or whether human rights violations, bribery and corruption are unethical or not.
It is unable to condemn slavery or animal abuse, the poisoning of rivers, waterways and seas, air pollution and environmental degradation in general.
Yet in an unpublished survey we conducted last year, 20 of the funds had invested in at least one of the 60 banks (directly or indirectly) that invested a total of $3.8 trillion in fossil fuels from 2016 to 2020.
Authority’s assertion that values are subjective and constantly changing confuses values with preferences. The choice of societal values is not based on personal choices that change like a whim of fashion.
Ethical principles and rules are based on establishing standards of behavior to ensure the safety of citizens and have often been established over a long period of time. Environmental protection is a long-standing principle among Aboriginal peoples. Any consultation with Maori would have informed authority of the Maori values of mana oritetanga (equality, fairness) and kaitiakitanga (guardianship, stewardship, care) to describe the ethical relationships between them and the Earth.
Human rights don’t change like the color of our socks. New Zealand strongly supports the establishment of the Universal Declaration of Human Rights and establishes the Commission on Human Rights.
In New Zealand, the moral realm includes many aspects of human-animal and human-environment relationships. For example, there is a wildlife law regulating behavior towards animals, birds and aquatic life. On the Department of Conservation’s website is a list of international and multinational conventions and agreements to which New Zealand is a party, and these are part of our moral domain.
A Simplicity Fund case study that assessed the validity of Simplicity’s claims to be an ethical fund goes into more detail about the dimensions of our responsibilities to each other and to the non-human world.
Our values will, I hope, continue to evolve. These principles form the basis of codes of conduct that apply to specific industry behavior (eg Forest Stewardship Council certification and animal welfare codes).
Change usually occurs after rigorous and lengthy public debate. When a society examines them, it does not mean that the authority cannot act on well-established values and codes. Evolution is usually based on extending existing norms (eg, women’s rights, animal rights, extending responsibilities to our environment) rather than rewriting the whole thing.
An investment fund’s statements about its values in its codes of conduct, values statements or principles or equivalent should be sufficiently explicit to allow a potential investor to be fully informed of how the fund will cover this moral area. to care for people and the planet. Investments that do not meet these standards should be excluded or committed by the fund to persuade a change in their behavior. Complete and transparent reports must be established.
Wise Response – a broad coalition of scientists, engineers, lawyers, artists and sportspeople urging New Zealand to confront questions about our future well-being – has filed complaints with the financial markets.
One example is AMP Wealth Management New Zealand which, through its Balanced Fund No. 2, has invested in 20 of the 60 largest banks to finance fossil fuels in the five years following the Paris Agreement. The broken promises of Deutsche Bank, JP Morgan and Standard Chartered regarding their US$1 billion loan to coal miner Adani for its Australian coal mine are concerning. These banks are invested by AMP Wealth Management NZ.
Another example is Generate, which relies on a vague ESG framework in its ethical values and relies on foreign funds for its application. Using these funds, he invests in the pulp and paper company APP, which has been boycotted by most major brands because it is linked to 30 years of deforestation, forest and peat fires and the destruction of the environment. wildlife habitat in the 2 million hectares of land under its control in Indonesia.
The authority did nothing about these complaints. It is time for him to start fulfilling his obligations.