Page 2174 - Week 06 - Wednesday, 9 May 2012
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video
release of the business strategy and within that the clean economy strategy. We know that renewables will be the prosperous energy generators in the coming decades. Investing in that is prudent and the mechanism proposed is a very reasonable one that leaves the detailed application of the initiative to the experts to be appointed to the investment advisory board.
This is certainly not a new issue and it is something that many governments all across the world are already actively dealing with. Other governments, such as Massachusetts and California in the United States, are in some cases actually the ones driving the shareholder resolutions for reform. I would also make the point, as I am sure I have done before, that the world’s largest sovereign wealth fund, the Norwegian government pension fund, has a very active ethical investment policy. The $525 billion fund has an active screening policy that carefully considers which companies it will and will not invest in and how it engages with companies when concerns are raised.
Back in 1996 Ms Kerrie Tucker first raised this issue in this place during the debate on the Financial Management Act. In 2002 the then Treasurer, Mr Ted Quinlan, indicated that indeed the government would take ethical considerations into investment decisions, albeit solely in the context of risk and return.
When the full scope of our investment portfolio was revealed in the Canberra Times the issue gained further attention and some level of action was finally taken. The ACT signed up to the principles of responsible investment and we do now have a framework for ESG considerations in relation to risk. We have recently had a review of our application of the principles of responsible investment in line with the parliamentary agreement. Whilst this has been progress it has been very slow and very limited. In fact it is fair to say that nothing has actually changed as a result of our actions so far. We are perhaps more aware of what we invest in but we have not sold a single share as a result of the PRIs and there is no evidence that we are in any way targeting the portfolio and positive social and environmental outcomes. We have taken the symbolic step and now it is time to take a tangible step forward and actually implement some minimum standards for our investment practices.
I will briefly turn to the issue of financial returns. Recently asset consultant Mercer conducted a study reproduced in the Australian Financial Review which found that over the past five years the average return of a sustainable fund was 5.6 per cent and the ASX index only 4.6 per cent. There are in fact six major funds whose ethical portfolios outperformed the ASX average over the past five years—the best performer almost doubled the ASX return.
There is now a very large body of research around ethical, sustainable and responsible investment. Perhaps the most notable and comprehensive is the Russell research paper entitled “Sustainable investing, marrying sustainability concerns with the quest for financial return for superannuation trustees”.
There simply is no argument that this reform will cost territory investments in terms of financial returns. A key part of what this legislation does is to force us to think about what our money is doing and to question whether we think it is appropriate for
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video