Skip to content Skip to main navigation

Business

A consulting company that trust its employees to do great work

ACT not doing anything about ethical investment but we are paying a consultant to turn blue in the face

By johnboy - 23 June 2009 28

The Canberra Times reports that the investments of the ACT public service superannuation scheme have been made harder to ascertain, but no concrete moves have been made to make it more ethical.

There is a school of thought, usually held by people who don’t have many friends, that if the smart ethical money is divesting from tobacco, weapons, and child slavery firms then there are superior investment opportunities to be had in the subsequently under-priced merchants of death and human misery.

But even if you do talk too loudly at barbecues about your investments this next bit would probably strike you as a particularly useless approach:

    Chief Minister Jon Stanhope ordered a review of the investments, saying he was uncomfortable with some of the companies’ work. But the Government has not instructed its investment managers to sell any shares since then, nor has it exercised voting rights at company meetings.

    Treasurer Katy Gallagher said yesterday that it had, however, hired an investment consultant, Regnan, to discuss environmental, social and governance issues with companies on the Government’s behalf.

So we’re paying a consultant to wander into the offices of, say, British American Tobacco or Lockheed Martin and lecture them about the evils of their core business? In turn requiring those businesses the ACT has invested in to keep someone around who looks good in a suit doing nothing more than offering tea and biscuits to our consultant?

Brilliant.

What’s Your opinion?


Please login to post your comments, or connect with
28 Responses to
ACT not doing anything about ethical investment but we are paying a consultant to turn blue in the face
Filter
Showing only Website comments
Order
Newest to Oldest
Oldest to Newst
GB 11:25 am 25 Jun 09

I agree that it is difficult for people in government to filter out particular lobby groups’ views from a more reasonable synthesis of the views of the general population together with implementing policies they were elected on; but this is part of a more general problem across all areas of government activity, not one specific to investment activities. Making political decisions is, fairly self-evidently, part of the business of anyone in politics; implementing political decisions is the business of public administration. Investment decisions are just one among many which require ethical consideration.

Taking your line — measuring only financial return of government activity — would mean governments should always maximise their non-tax income, and minimise expenditure, without reference to ethical considerations. Yet people vote against tax reductions; and vote for governments to make expenditure on their behalf. This includes foregone income of the kind we may be talking about here (if in fact the ethical decisions do reduce income, which is not certain.)

It is possible – and increasingly common – for people to invest with ethical considerations, without becoming beholden to minority causes. Ethics as part of investment practice has grown up a lot since the early windfarm-and-greenbag funds.

It is possible to synthesise basic ethical guideposts – eg not investing in murder or theft, as you point out. These are not trivial, and it is common for large companies to be involved directly or indirectly in such things. We can make choices based on this.

At a much finer level of detail, individuals can make investment choices which exclude particular activities that they do not want to support — eg radical catholics not investing in condom makers. But at a government investment level, those considerations would be silly. Making the judgement as to how far to go is an overtly political decision, which a good democracy should take on, not avoid.

And ethical investing is a two-way street — that’s kind of the point. By choosing where we invest, we become an active market force instead of a passive one. This example, from an article by James Kirby, shows one possibility.

In 2004, it was revealed that Wal-Mart habitually locked night-workers in its stores to protect merchandise, and that, in many cases, employees did not have access to a key. The practice came to light when an employee had his leg crushed in a Texas store and could not get out. On 6 June this year, the world’s largest superannuation fund, Norway’s state fund, sold all its Wal-Mart stock, forcing down the Wal-Mart share price. The fund, a model for the Australian government’s Future Fund, would no longer deal with the giant US retailer, citing the company’s “systematic human rights abuses” as the reason for its decision.

The Norwegian state fund is not an “ethical”, “socially responsible” or even ”sustainable” fund. It’s just a fund run by people with ethics. We’d all probably be better off if there was no ethical-investment “industry”, and instead more funds run by ethical fund-managers.” [my emphasis]

I think this is what the ACT Government should be working towards.

However, as others have pointed out, I don’t think their current plan is going to achieve much. For the consultant to be a worthwhile investment, they would need to “discuss environmental, social and governance issues with companies on the Government’s behalf” and make clear to them that the Government’s investment decisions would be guided partly by their commitment and achievements in these areas.

Consultant with no actionable outcome = waste.

monomania 4:52 pm 24 Jun 09

Great Southern and Timbercorp were considered ethical investments. Trouble is the managers of these schemes didn’t seem to have any.

PigDog 4:21 pm 24 Jun 09

GB,

My view is that for the Government to be acting ethically it should be getting the best result for it’s citizens. Most people, I would argue, would see the best result as being to pay less tax because the government is getting the best possible return on its investment.

I don’t believe that your average person actually cares where that return comes from. Sure, they will say they believe in cause X or Y if you ask them, but they will still wear clothes that come from a third world sweat shop, use power from uranium or drink coffee from what used to be a rainforest.

There are many, many companies that make or supply products that certain sections of the community may find unethical. The Government would end up essentially playing politics with its investments in response to certain sections of the communities views of what is ethical. Want to win over the Catholics? Get rid of those Ansell shares! Shooters Party hold the balance of power (ala NSW)? More Smith & Wesson shares!

The Government, in my view, should keep well away from making judgements on what is ethical or not. Sure, we need broad rules of the road, don’t murder, steal etc, but I do not want what is ‘ethical’ re-decided every three years be whoever ends up running the budget or by someone who wins 2% of the vote but happens to hold the balance of power.

The Government should treat it as a blind trust, and simply ask for the best return.

As an aside, the first ethical investment provider I searched for that came up in Google lists the ASX and London Stock Exchange as ethical investments! Buying shares in tobacco, alcohol or weapon manufactures is unethical, but companies that make money from the buying of those shares is fine! Weird.

Skidbladnir 2:41 pm 24 Jun 09

If cuddling puppies has a better or comparable return on investment for a similar level of risk thats fine, but if the puppy-cuddling market is unstable and about to put a lot of professional puppy-cuddlers out of work (but expected to recover eventually), the problem most people would have if super manager wanted to get out of it and invest in a wholly different sector with similar or better returns would be if the brokerage fees were going to outweigh any financial benefit of investing in Altria Group\General Dynamics\a South-Phillipines hostage ring (provided the returns were equal or better, at least until the previously highly profitable puppy-cuddling industry picks up again).

Ethical investing might allow for diverse, but not -as- diverse as total market freedom, and not everyone minds if their money comes back bloodied.
If they really want to give people an ethical super fund for ACT Employees, create one, and then give super participants a choice?

GB 1:56 pm 24 Jun 09

Pigdog,

I disagree.

Part of why I choose to elect particular people is because they will make decisions based on things other than economics – including ethics. Your slippery slope argument just points out that these decisions are difficult, and require consideration of complex ideas and relationships.

Just because it is difficult, does not mean we, or our governments, should just be without ethics. There is no reason why governments — like individual people, and groups of people such as companies — should not think about, and act on, ethical concerns.

This is not creating an ‘artificial’ boundary on investment, it is a fundamental process of government. In fact you are suggesting an artificial boundary about what matters should concern governments.

PigDog 11:16 am 24 Jun 09

GB,

The Government’s investments should be seeking the highest return, be it from ‘ethical’ investments or traditional ones. Sure, if an ethical investment is making the best return, put the funds in it.

The Government should not though be putting some artificial boundary around what it invests in. How is a government going to define what is ethical anyway? Tobacco? It is legal – is it moral? Alcohol? Uranium mining? An abortion clinic?

Ethical investments can and do make a good return, but it shouldn’t exclude looking elsewhere for better returns.

I always thought ethics were foreign people.

GB 8:47 am 24 Jun 09

bd84 said :

… rather than a grand idea of picking nice and cute investments.

Sounds like you don’t know much about ethical investment.

Try this, for example.

It’s the public’s money not the Government’s after all.

That’s even more reason for the Government to choose carefully. We elect governments to do those things which market forces do poorly. Like ethics. We expect our government to behave ethically — including what it invests in, who it borrows from, etc.

Related Articles

CBR Tweets

Sign up to our newsletter

Top
Copyright © 2018 Riot ACT Holdings Pty Ltd. All rights reserved.
www.the-riotact.com | www.b2bmagazine.com.au | www.thisiscanberra.com

Search across the site