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Issue No. 126 | 01 March 2002 |
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I Don�t Like Sprouts
Interview: Clean Hands Corporate: Out of Asia Unions: Tears, Real And Crocodile, At The Ansett Wake Economics: Labour�s Capital: Individual Or Collective? History: Mardi Gras: The Biggest Labour Festival? International: Driving A Hard Bargain Review: In Bed With a Sub-Machine Gun Satire: Whitlam Forgives Kerr: "At Least He Didn't Dismiss A Rape Victim" Poetry: Dear Mother
The Soapbox The Locker Room Week in Review
 More on Harry BridgesWell Done, SplitterRepeating History
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Interview Clean HandsInterview with Peter Lewis
How significant is a decision by CALPERS to pull out of South East Asia for super funds in Australia? Well super funds in Australia are paying a lot of attention to those sorts of decisions. There's a trend now in the US, Canada, UK and Europe with big funds refusing to invest in national economies that fall short of proper standards. Now, that hasn't happened in Australia yet, but obviously because Australian super funds also invest in an international environment, in a global environment, they are paying increasing attention to these sorts of decisions. On the American example, who sets the standards, what are they and who's call is it that they've been breached? Well, there is a Council of Institution Investors in the United States of which Calpers is a member along with other big pension funds. They conduct research nationally and globally about individual companies and about national economies and they make that research available to the members of the Council. So Calpers would get that research, Calpers' own trustee board would make that decision and that would be the situation in Australia. Any investment decision is the responsibility of the particular trustee board. Now we have several thousand medium to large size super funds so each trustee board is ultimately responsible for its own decision and at this stage, super funds in Australia haven't combined or acted together in relation to what we might call "social issues". What barriers legal or otherwise, to go down this track? Well, individual trustees who are members of trustee boards are very conscious of their legal responsibilities and they are very conscious that they can only make a decision regarding their super fund if that decision meets the 'sole purpose test'. And the sole purpose test is that every investment decision must be made solely for the purpose of earning income for the members. So they're very cautious in bringing other than financial performance criteria into the decision. But some funds have responded to the desire of their members to be socially responsible investors so a number of the big funds now are looking at social criteria when they make investments. But they have to look at them secondarily, if I can put it that way. So does that mean it's basically illegal to pull your money out of a company that's going to make heaps of profit but rapes the environment and exploit it's workers? No, it doesn't mean that. No. So where is the line drawn? Well, that's really for the trustee. The trustee's job is to find the variety of investments that produce income for members. Now if they can find investments that produce income and are also socially responsible, then that's a good outcome. Now many trustees, even without an official policy, are responsible investors and that they do find out a bit about the companies they are investing in. They are not obliged to invest in any particular company, but they are obliged to have that sole purpose at the front of their minds and they are obliged also legally to have a range of investments. There is fledgling ethical investment movement in Australia, there seems to be a few funds that go along this course, but how successful are they being at the moment? The particular year that we're in is not a good year for any investment returns. A number of funds that have, what they call "socially responsible investment choices" for members, have reported that they do get similar results as they do from investments that are not filtered to the socially responsible criteria. So it's a fledgling movement but it is growing. I've seen it grow in the last three years. There's a council of superannuation investors that was established about a year ago and that has a number of the big industry super funds and some of the public sector funds involved and they're in the process of researching the corporate governance performance of Australian companies in which they're likely to invest. But when they get the results of that research, each trustee board will make its own decisions, whether to take it into account or not. Is there a coordinated strategy from union reps on the industry super funds to, for instance, get labour standards better recognised by super funds making investment decisions? I'm not aware of any coordinated effort. Labour standards haven't been on the radar in the past, but in the amendments to the Financial Services re-format that went through Parliament just before the election , a number of new social criteria were included. The Labor opposition made an amendment to include Labour standards. Now at the moment the regulators in the industry are looking at how that will be applied. I should say that those amendments require super funds to report to their members whether or not they take these criteria into account. They don't have to take them into account but they have to let their members know that they are taking them into account and how they have done that. So it's very early days, but that was the first time that Labour standards in this context appeared in superannuation regulatory environment. On a more general frame, is there legislative change that could actually facilitate more ethical investment through super funds? I believe that these new amendments to the Financial Services re-format will do that or they will have the capacity to do that and we'll see that working out over the next couple of years. A lot of Australian workers would like to think their pension savings were being invested with a view to good causes. What can individuals do if they want to have some sort of influence on where their pensions are going? They all have trustees representing them, they can certainly let their trustees know that they want this sort of information and that they have views about what kind of companies should get the benefit of their savings invested in them. Some funds, for example HESTA, has had for a couple of years now an eco choice. If you're a member of Hester you can opt to have some or all of your savings put into their eco fund. And now a number of other funds are following suit. ARF for example, another big industry super fund is going to offer such a eco choice for their members. So do you see this as a real development or just a bit of tilting at windmill? I see it as a real development but one that is moving extremely slowly in Australia. The trustees themselves have quite a lot of caution and members of funds need to know more about the issue. The big industry funds all have websites and a lot of this information can be found on them so workers who have access to the internet could have a look at their fund and see what the fund says about in relation to socially responsible investment. Finally, what do you see as the big push required to get this moving along? I think it will come down to the members. Members of the fund will start to demand information about the kinds of investments to be sure they're not investing with companies with the really bad track record in the environment or labour standards. I think the pressure in the end will come from the members and the trustees will respond to that pressure. Susan Ryan is president of the Australia Institute of Superannuation Trustees
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