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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2008-04-02 Daily Xml
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PARLIAMENTARY SUPERANNUATION ACT

Introduction and First Reading

The Hon. M. PARNELL (16:05): Obtained leave and introduced a bill for an act to amend the Parliamentary Superannuation Act 1974, the Southern State Superannuation Act 1994, the Superannuation Act 1988 and the Superannuation Funds Management Corporation of South Australia Act 1995. Read a first time.

Second Reading

The Hon. M. PARNELL (16:05): I move:

That this bill be now read a second time.

This bill is about enabling public servants, politicians, police and others—for whom Super SA is their compulsory super fund—to have a choice to put their own money into a responsible investment option. Currently, Super SA offers a range of options which are all based on risk. My bill will require it to provide one more option. Most South Australians can choose an ethical option for their retirement savings but, because Super SA is a compulsory fund, public servants, politicians, police and others cannot. As they cannot choose their own fund, the very least their fund should be able to do is to offer an ethical option.

This is not the first time that I have raised this issue. In December 2006 I moved amendments to the Southern State Superannuation (Insurance, Spouse Accounts and Other Measures) Amendment Bill. I asked a number of questions in parliament and I raised the issue through the media, in particular, the issue of Super SA investing in big tobacco and oil companies.

The response that I received from the government to these calls throughout 2006 was that there is no demand. In fact, I received a letter from the Treasurer, dated 22 June 2007, which included the following statement:

You also suggest in your letter that Super SA should survey all fund members to establish a level of interest in an ethical investment option. I am advised that the Super SA board has maintained a watching brief on the issue of member demand for ethical investment options for some years and member demand for such an option has been low.

That is the official response from the Treasurer. The response is very similar to ones that have been received by other members (and members of the public as well) who have contacted the government , the Treasurer, or Super SA about this. It is also been the consistent line in answers to questions in parliament.

However, I do not accept that that is the case, and so I started a campaign which was borne out of the communications I received from public servants who said that they did want an ethical superannuation option. There is a petition, which will be presented shortly, with 470 public servants saying that they want this option. These are not just citizens. People might think that 470 is not a big number, but from that group of public servants I think it is a huge number.

I also used the Freedom of Information legislation to try to find out where the real blockage was in the provision of an ethical superannuation option. As part of that exercise I obtained some survey results that had been collected on behalf of Super SA. The survey was conducted in March and April of 2007. It was called 'satisfaction research' and it was conducted by MRD Research Pty Ltd. It produced the following results. First of all, they sampled members of the Super SA Triple S scheme. The sample size was 2,678 members. Anyone who is familiar with research would know that that is a reasonable sample size.

The question people were asked was: would you choose to invest your super in socially responsible investments if that option were available to you? The result of the survey was that 828 people (31 per cent of the sample size) said yes, they would choose to invest if that option were given to them; 10 per cent said no, they would not; and 58 per cent said maybe. So, 89 per cent of the people answered 'yes' and 'maybe' and were interested in an ethical super option.

To show that the result was not just a fluke, another survey was undertaken involving members from a different fund, and it was done at around the same time. Members of the Super SA lump sum scheme were surveyed, and the sample size was 423, so it was a smaller sample. The question posed was: would you choose to invest your super in socially responsible investments if that investment were available to you? The result was that 34 per cent said yes, they would; 10 per cent said no, they would not; and 54 per cent said maybe. So, they were very similar results, in that 88 per cent of people were in the 'yes' or 'maybe' category.

It is clear that I have not been the only person lobbying for these changes. I note from another document obtained under the Freedom of Information Act that at least 50 people have contacted Super SA. I note that one of the documents provided to me was an email prepared for the benefit of the government when answering questions during estimates. It states:

We have done a count of contacts on SRI—

that is, socially responsible investment—

over the financial year to date. We have had about 35 emails, one complaint and four Treasurer complaints (which includes Mark Parnell)—

I am not sure what that means—whether it is complaints about Mark Parnell or that I am one of the people who complained to the Treasurer—

and phone calls are about 12.

So, at least 50 other people, most of whom I do not know, have contacted Super SA. I know that there have been many letters from backbenchers, some of the more notable ones being from the Hon. Ian Hunter and the member for Hartley in another place (Grace Portolesi). The curious thing for me relates to the timing of the responses and their consistency. For example, the letter in reply to the Hon. Ian Hunter was dated after August 2007, and the Treasurer's reply stated that they had no intention of putting ethical super choice in because member demand for such an option remained low, yet we know that in March 2007 (four months earlier) the survey showed, in fact, that demand was high. So, the Treasurer has been either badly briefed or not playing with a straight bat on this, even with his own colleagues.

The member for Ashford in another place (Steph Key) moved for the Economic and Finance Committee to investigate and report on ethical superannuation. I commend her for that approach, but in reply I say that it is not necessary to do that. This is not rocket science; it is not a revolutionary idea. We know that the Economic and Finance Committee already has a backlog and that, in sending this matter to the committee, it is likely to take a very long time to achieve any results.

We also know that other states, such as Queensland and Western Australia, have offered ethical superannuation for a long time. In general, those funds have outperformed the mainstream funds. More recently, members of parliament in Victoria now have a free choice in relation to their superannuation, including an ethical superannuation investment option. Whilst I commend the member for Ashford, I do not believe that we need another investigation: I think we just need to get on with it.

When I introduced this measure some time ago, I was heartened by some of the responses, in particular those from the Hon. Rob Lucas, the Hon. Dennis Hood and the Hon. Sandra Kanck, who commented that they could see some merit in the idea and that its time would eventually come. The Hon. Rob Lucas had the following to say:

In terms of the issue of ethical investments, I suspect that, as with a number of other things, the views of the Hon. Mr Parnell will eventually prevail. I do not think that in relation to all the views of the Hon. Mr Parnell, but I suspect that we will look back in X years—and I am not sure what X will be—and there will be an ethical option there somewhere.

More than a year after first introducing it I am putting it forward again to members as an idea whose time needs to come. The Hon. Rob Lucas also said:

We are all different, but I suspect that ultimately we will see some version of an ethical investment option at some stage in the future.

So I have decided to again test the will of the Legislative Council with this measure and have decided to do that in preference to the direct lobbying of the Treasurer, which has not yet achieved results. That would be the simplest thing to do because Funds SA could, without any legislative authority, do this tomorrow. It could put in place an ethical superannuation option, just as it has put in a range of other options towards high risk, low risk, money markets, capital and different types of share options. There is no excuse for further delay. Other states have offered it, and it is relatively straight forward.

I note that the executive director of the company Australian Ethical Investment, Mr James Thier, wrote to the Premier on 23 January 2007. His fairly brief letter sums up the situation fairly well, as follows:

Dear Mr Rann, I am an executive director of Australian Ethical Investment, a dedicated ethical fund manager with funds under management in excess of $500 million. For 20 years we have produced competitive returns through investment in sustainable and socially just enterprises. It is disappointing that in December 2006 your government rejected a call for an ethical superannuation option to be made available to South Australian public servants. You may be aware that the ACT Labor government is currently being criticised due to the inappropriate investments its public sector superannuation fund has made. The fund has invested in destructive activities such as tobacco, gambling and armament manufacture. Understandably, there is vocal appeal for these public servants to be given an ethical investment option. There was a similar outcry last year when it was revealed that the New South Wales government had considerable investments in tobacco, in spite of their strong anti-smoking policies.

There is an expectation that our governments will govern responsibly, and this responsibility should extend to the use of all taxpayer funds. Logically, it is unacceptable that the South Australian government support blatantly harmful businesses. Fund members and the wider community should expect congruity between government policy and their investment strategy. Giving your public servants the choice not to direct their funds into the manufacture of armaments, for example, is not an onerous exercise. Funds SA already has many experts in assessing the financial credentials of the companies in which it invests, and a network of ethical research organisations exists to provide data on the ethical credentials of these companies.

Australian Ethical Investment, for example, outsources its ethical research to the non-profit Centre for Australian Ethical Research. The centre is part of a world-wide network providing research on corporate sustainability. I am happy to speak with you or send you information if you are interested in further details about how your government can provide an ethical superannuation option to its employees. Yours sincerely, James Thier.

This issue is becoming mainstream. Even Choice magazine provides an analysis of the array of different funds offered, alongside the choice of refrigerators and washing machines. The member for Ashford, Steph Key in another place, had the following to say about how mainstream ethical investment has become:

What I am saying is nothing that is particularly revolutionary. A number of private funds around Australia have ethical and sustainable investment and may also engage firms that do the investment for them to make sure that those principles are observed. Some examples of this include AMP Capital Sustainable Share, Australian Ethical Super Equities, BT Institutional Australian Sustainable Share, BT Institutional Ethical Share, Challenger Socially Responsible Share, Hunter Hall Australian Equities, ING Sustainable Investment Australian Share, Perpetual Ethical SRI, SAM Sustainability Leaders Australia Fund, and Benchmark ASX 200 Index.

The government has been hypocritical on this issue up to date and the case I have referred to on many occasions is the investment of Funds SA on behalf of Super SA in the company Altria, the parent of the big tobacco giant Philip Morris, maker of Marlboro. I raised concerns last year that some $160 million was being invested in this cigarette company. I obtained that figure from the Super SA website, which lists the Funds SA top shareholdings.

In two columns, one headed 'Australian equities' and one headed 'international equities', we find that the Altria Group Inc. comes in under the international column at some 0.5 per cent of total investments. The vast bulk of companies are under 1 per cent as there are so many different companies. Only three companies have over 5 per cent, so half of 1 per cent is a big holding. It amazed me that some time around August last year Super SA quietly disinvested itself in Altria shares. When we looked, they had gone; the shares had been sold. Clearly some sort of ethical screen is being applied. My feeling is that it was too embarrassing for the government to keep on investing in Marlboro. Clearly, if a test has been applied, I want to know what that test is, and if we are going to put tests in place let us put one in place to give public servants, politicians, the police and others a chance to have an ethical choice.

It was not as if the company had gone bust; its returns were as good as ever. Clearly, the government has decided that it does need to apply some ethical standards to its investment, so I am saying that we should formalise that through the offering of an ethical investment fund for superannuation.

The Hon. R.I. Lucas: Is BHP Billiton an ethical investment?

The Hon. M. PARNELL: The honourable member asks whether BHP Billiton is ethical. I am not an expert in ethical investment, but I have pointed out a number of groups that are. I think you would apply the test to that company as you would to any company. The broader question for me is why should it take a member of parliament to raise concerns individual company by individual company—whether it is BHP or whether it is Altria—before some sort of action is taken? Instead, the government should be taking a good hard look at where it is investing our money on our behalf and recognise that its investments do need to be consistent with its policies.

There was another bit of information from the government that floored me and that is the State Greenhouse Strategy, which members will recall we have discussed at some length in this place. Get out your copy and have a look inside the front cover of the State Greenhouse Strategy, and right alongside the foreword, which is signed by Premier Rann, there is a list of greenhouse friendly actions that you can take. One of the suggestions is 'moving my superannuation to a sustainable fund'. That is the advice that we are giving to everyone else in the community. Why should that advice not also be applicable to our public servants and our members of parliament?

The Funds SA Annual Report talks about how it is helping the State Strategic Plan. It states:

Funds SA contributes to the state's strategic plan through the plan's objective 'growing prosperity'.

My question is: what about the other 70 targets of the plan? What about all those other social and environmental objectives? There is more to this than just growing prosperity.

In March this year, the Australian Conservation Foundation released a report entitled 'Responsible Public Investment in Australia'. That report highlighted inconsistencies between state government policy and where state government funds are invested. For example, it points out that in South Australia some $383 million of state money is invested in fossil fuels compared to only $9 million which is invested in renewable energy.

It also showed that South Australia is a backwater on this issue. For example, the equivalent fund in Victoria which is responsible for managing $40 billion worth of investments for 14 different Victorian government entities has already signed up to the United Nations Principles for Responsible Investment. These United Nations principles were launched 13 months ago. They now guide about $10 trillion in investments globally.

These principles oblige signatories to incorporate environmental, social and corporate governance (ESG) issues into analysis and decision making processes across their entire investment business. They commit to filing shareholder resolutions consistent with long-term ESG considerations, engaging with companies on ESG issues, and asking for standardised disclosure on ESG matters, using tools such as the global reporting initiative. So, they are putting pressure on the companies in which they invest.

The United Nations principles which are intended to influence decision making across the investment spectrum rather than just in socially responsible investment—which is the subject of my bill—have had widespread take-up in Australia. There are a number of other heavyweight signatories, including HESTA which has $9.8 billion under investment. VicSuper has $5.4 billion, and there is a range of other large investors.

My bill says that the concept of socially responsible investment is not new, not unique, and there are many different options available. I say that because last time we discussed this there was some concern about what is ethical. The debate, I would suggest, has actually moved on because clearly we are not asking everyone to sign up to any particular model of what is ethical. Through this legislation we are trying to give people a choice.

I make the point that this is not about my version of ethical, and I am not asking Super SA to reflect my views. The bill says that the option of nominating a class of investments based on consideration of the impact of the investment on society and the environment must be made available to contributors subject to terms and conditions determined by the board. We are still giving the fund managers the option to manage the funds, but they can follow guidance and should follow guidance from bodies such as the United Nations.

What does responsible investment look like? Really, it is an umbrella term that is used to describe an investment process which takes environmental, social, ethical or governance considerations into account, and the process stands in addition to, or is incorporated into, the usual fundamental investment selection and management process.

There are many terms that are used and they are often used interchangeably: responsible investment, ethical investment, green investment, sustainable investment, socially responsible investment, clean technology investment, or simply the shorthand acronym SRI. Responsible investment products can differ from each other in the way in which they take these issues into account.

Typically, a responsible investment product will manage environmental, social, ethical, or governance issues using one or more different practices. For example, you can use negative screening, which means you avoid some types of investment. You avoid investing in gambling companies, or weapons manufacturers. You can do positive screening, which means that you can give a preference to activities or characteristics which are deemed desirable, for instance, future oriented industries such as renewable energy or health care.

You can also take an approach which is referred to as 'best of sector', which means selecting leading firms in every business sector—whether it be manufacturing or mining or whatever—based on their environmental and social performance or sustainability. It does not need to rule out companies of the type that the Hon. Rob Lucas referred to. Socially responsible overlay is another way of sorting through the range of investment options.

That approach involves selecting shares for a portfolio in the usual way, then adding a process for addressing issues that relate to social responsibility. So, you might not even be starting with the best companies: you might be starting with companies that are not there but working with them to improve. As I said, SuperSA will decide how and what it chooses to offer for its members.

There are now over 100 superannuation funds in Australia that offer an option that takes into account environmental and social considerations. That figure includes eight of Australia's 20 biggest superannuation funds. So, if eight of the 20 biggest funds see sufficient demand to offer it to their clients, how on earth can we in this state maintain that our public servants, police officers or members of parliament are so different to the people in mainstream Australia that we do not care about these issues? I cannot accept that for one minute.

I do agree with the Hon. Rob Lucas that this is inevitable. I say that we are already behind global and national trends, but the message from my bill is that, at the end of the day, this is about choice. No-one is forcing people to invest other than how they want to. I am saying that, if a choice is to be made available, let one of those options be an ethical choice. I do not think the Treasurer has been straight with us about the level of demand. The final call at the end of the day should rest with our public servants. They are saying that they want this option, so let us just get on and do it.

Debate adjourned on motion of Hon. J. Gazzola.

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