Inequality a concern for fund

Last updated 05:00 22/06/2014

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The New Zealand Superannuation Fund is taking a renewed interest in responsible investing and inequality, after participation in a high-powered summit in London.

Adrian Orr, the NZSF's chief executive, last month took the stage of the Inclusive Capitalism conference in London.

Conference attendees, a mix of sovereign wealth funds, private sector fund managers and prominent policy-makers, were reported to control 30 per cent of the world's wealth.

Orr told the Sunday Star-Times that while social concerns already formed part of the NZSF's responsible investment policy, issues such as inequality should now be front-and-centre with all financial decision-making.

Orr said inaction by investors was often driven by a demand for confirmation that acting on responsible investing principles resulted in superior long-term financial results.

He said awaiting final results - preliminary finds have been inconclusive - was a recipe for inaction.

"It's always going to be more of a belief at this stage, but don't sit and wait for the proof. Because it'll come too late."

The conference was notable for strident comments on the dangers of growing inequality by both the Governor of the Reserve Bank of England and the head of the International Monetary Fund.

IMF managing director Christine Lagarde alluded to Marx in her address: "One of the leading economic stories of our time is rising income inequality, and the dark shadow it casts across the global economy."

She added: "Disparity also brings division. The principles of solidarity and reciprocity are more likely to erode in excessively unequal societies."

Bank of England governor Mark Carney said: "My core point is that, just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself."

Orr said concerns about inequality in New Zealand, best expressed by the Living Wage movement pushing for a higher minimum wage, were being weighed by the NZSF.

"I can't speak on behalf of the chief executives there, but we're cognisant of it," he said.

The aged care sector has come under considerable scrutiny by the Living Wage campaign, an industry the NZSF has broad exposure to. Along with minor stakes through index investments, last year the NZSF spent $126 million bringing its stake in Metlifecare to 19.9 per cent.

Orr said discussion on inequality and staff pay levels formed part of discussions with these company boards.

"We talk to chief executives and ask if salary policies are sustainable - to recruit, maintain and train staff. And if it's not sustainable, it's not a long-term investment for us," he said.

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Orr acknowledges there's some irony in arch capitalists, including himself (last year Orr was the country's highest paid public servant with take-home pay of $667,000), giving lectures on inequality.

"I'm a very healthy sceptic and sitting in the room, if we were all just preaching to each other ‘It's not an issue, capitalism will resolve it', I'd be very cynical."

Despite rubbing shoulders with some of the world's most powerful people - Orr said he shared a dinner table with Bill Clinton, Prince Charles and members of the Rockefeller and Rothschild dynasties - the NZSF boss said he didn't take any selfies.

- Sunday Star Times

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