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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2008-05-07 Daily Xml
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STATUTES AMENDMENT (ETHICAL INVESTMENT—STATE SUPERANNUATION) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 2 April 2008. Page 2218.)

The Hon. R.I. LUCAS (21:00): I rise to support the second reading of the bill and, for those avid readers of Hansard (including my mother and the other 29 South Australians), I refer to pages 2,409 to 2,413 of Hansard to indicate the reasons the Liberal Party supports the second reading. The debate that we had on the police superannuation bill, which was a government bill, involved the Hon. Mr Parnell moving an amendment in relation to ethical investment, and the Liberal Party supported that amendment. I spoke at length in relation to the issue, and I will summarise it very briefly.

I outlined that there were two issues to be resolved. I indicated, first, that it is a matter of individual choice and, personally, I would not be investing money in an ethical investment option if I had that choice. The second issue is whether we as a state ought to prevent others, such as the Hon. Mr Parnell, who might want to choose an ethical investment option for themselves in their superannuation fund, from doing so. As I said then, the shadow treasurer and shadow minister for finance indicated the Liberal Party's position was that it would be prepared to support that option. I outlined that in the police superannuation bill at pages 2,409 to 2,413.

In indicating our support for the second reading, I canvass briefly that the Hon. Dennis Hood has given notice of moving an amendment to the Hon. Mr Parnell's bill. As I have outlined to the Hon. Mr Parnell, the Liberal Party room has not yet had an opportunity to debate what looks relatively simple and innocuous but is a potentially difficult and complex amendment of the Hon. Mr Hood. We will certainly be in a position when the house next sits for private members' business to indicate the party's position on the Hon. Mr Hood's amendment.

The Hon. D.G.E. HOOD (21:02): I rise to support the second reading of the bill on behalf of Family First. With respect to the Hon. Mark Parnell, it is a fairly simple bill so far as what is written in the paper goes. It simply inserts the requirement for state superannuation to provide an investment option for state superannuants that takes into account the impact upon society and the environment.

Ethical superannuation is a welcome and recent trend, but it is also something that has considerable historical tradition, which I will reflect upon briefly. Indeed, the Quakers were one of the first groups to promote ethical investing in about 1758 when they precluded their members from investing in the slave trade. Notably, that was 50 years before William Wilberforce famously achieved the abolition of the slave trade, as my colleague the Hon. Andrew Evans celebrated in his matter of interest on 1 August last year. Another early thinker in ethical investing (during the 18th century) was the famous theologian John Wesley, and it is said that in 1928 it was Wesley's Methodists who founded the first ethical mutual fund. Today, funds such as the Mennonite-founded Meritas Fund in Canada and the Quaker-founded Joseph Rowntree Charitable Trust give grants to groups concerned with peace, disarmament and human rights, and still maintain a healthy return to investors.

After many social issues, such as the Holocaust and, indeed, apartheid in the last century, I think it is fair to say that ethical or 'socially responsible' investing has broadened in its outlook, and this century one of the strongest aspects of concern for ethical investment relates to the environment. I am sure that is one of the major underpinnings of the Hon. Mr Parnell's reason for introducing this bill in the first place. Family First celebrates the history of ethical investing and believes in that strong tradition continuing, but we also welcome this new trend in ethical investing as a form of consumer activism to get big business to behave more responsibly, where appropriate.

To set the record straight, we have opposed the honourable member's pushes—initiatives, is perhaps a better way of putting it—for ethical superannuation previously, and the reason is they have been targeted at specific aspects of the superannuation industry, if you like, or particular options within that field, and we strongly favoured a whole-of-government approach across the whole state for all people who would be affected by this proposed legislation.

The next obvious question that needs raising, therefore, is: if it is to affect many people, then exactly what is 'ethical'? I think that most conscience votes and, indeed, a number of other votes, hinge on that question, so I believe we must explore briefly in this bill what is 'ethical'. The Hon. Mr Parnell is right in saying that, in many cases, superannuants have no idea where their funds are going; and, in some cases, if they knew they would be horrified. What might horrify one superannuant might be neutral or, perhaps, even positive to another. That is how people differ in their ethics; or, perhaps to be fair, they place a different emphasis on what they think to be a more important ethical issue.

Perhaps the right phrase here is 'issues of conscience'. I want to explore this issue of conscience briefly because, as indicated by the Hon. Mr Lucas, I have filed amendments to that effect. If it agrees to this bill in the other place, it will require the government to consider issues of conscience in determining whatever fund or funds would be offered to state superannuants as ethical investments. In briefings on superannuation bills, Family First has questioned how the government would approach ethical superannuation. The impression we get is that the government will consider one or two so-called off-the-shelf ethical investment products.

Relating back to my comment about people having different ethics or different points of view on issues of conscience, I trust that members can see our concern that, if one fund is taken off the shelf, so to speak, and put forward to state superannuants as an ethical or so-called ethical option, that fund might not reflect the ethical values of all superannuants. Indeed, these people may wish to invest ethically because it sounds good but, when they discover where their so-called fund investments are going, they might feel somewhat disappointed with the outcome.

Examples of funds that offer ethical superannuation include one called SunSuper, of which my wife is a member. SunSuper, in one of its particular ethical options, avoids investing in companies that have a material exposure to the production of alcohol, gambling, pornography, tobacco and, interestingly, uranium mining. A national group called Australian Ethical and the New South Wales based group called Local Government Super Scheme take a dim view, among other things, of investments in gambling, tobacco and alcohol production.

With respect to some overseas examples, in the US funds such as the Appleseed Fund, the Aquinas Growth Fund and PIMCO refuse to invest in companies that manufacture alcohol, tobacco products or pornography, amongst other things. The Aquinas Growth Fund also precludes investing in products that aid in abortion and other contraceptive measures and goes so far as to rule out investing in what it considers to be particularly violent forms of media, such as, I suspect, Rockstar Games, which produce Grand Theft Auto, and other companies that produce similar material.

In Canada the Investors Summa Fund Family, Mackenzie Sustainable Opportunities Fund and Meritas Investments Incorporated will not invest in companies whose revenues primarily derive from alcohol, tobacco, gambling, pornography or critical weapon systems. The point there is that, whilst the word 'ethical' is used for all these funds, one can see that what they choose to invest in and choose not to invest in can be quite different. Stepping back for a moment, in an ideal world (and this might not be far out of the question), it would be wonderful if superannuants (just as they can with investment strategies, such as aggressive, balanced or conservative options) could also check with a box whether they want their funds in a way that respects a certain environmentally ethical, biological and/or conscience-ethical way.

Ideally, a person could nominate these, but at present it is probably only those people financially wealthy—and, perhaps, time wealthy enough—to run self-managed superannuation funds who could invest with that level of specificity. Indeed, the very near future may well be different. Before I turn to those three headings, I want to raise what I have discovered in my consultation on this bill. There is a strategy described as 'best of industry' within the ethical investing industry, which sees funds say, 'We will invest in the uranium mining industry', and they invest in the market leader in terms of environmental sensitivity within that field.

That means that ethical funds are still investing in areas that some may consider unethical, for instance, the uranium mining industry, but they invest in that particular company in that industry that they consider to be the most ethical option. In essence, within ethical investing there are some unsatisfactory practices if one is really being ethical about the processes. It is quite conceivable that, if ethical investing was one of the next big things, some unscrupulous players could enter the field saying that they are doing research to ensure that the companies invested in are ethical when, in fact, they are not; and the so-called ethical fund is only an ethical fund by name and may in fact deceive people, given that the word 'ethical' might be quite misleading. I am not making any allegations here, but I believe it is a real possibility and again highlights the fact that 'ethical' means a lot of different things to a lot of different people.

The question of present industry practice is a relevant consideration and demonstrates the merit of the Family First amendments to this bill. Our amendments, though numerous, are very simple in that they include the words 'issues of conscience generally recognised in the community' as a third parameter. That is in addition to the impacts on society and environment as outlined by the bill that the Hon. Mr Parnell has put forward. The purpose is to ensure that these issues of conscience are also considered in what is deemed ethical or not ethical.

In addition to providing for issues of conscience, it is highly relevant for the government to consider in selecting funds or a fund to offer to state superannuants, should this bill pass, that state superannuants should not be offered investment options in an activity that is illegal in South Australia. For example, on the social ethical side, if exploitation of child labour is part of the business operations of an overseas company, and it is against the law in South Australia (as clearly it is), then no state superannuation money should be invested in such funds. That sounds like an obvious thing to say, but when you investigate where some of these funds put their money, it is surprising to say the least.

It should be apparent to members that the issues I raise demonstrate how ethical investment adds another level of disclosure requirement to ensure that the ethical investments match the ethical concerns of the superannuants concerned. In conclusion, Family First supports ethical investing and certainly supports the second reading of this bill. However, our overarching concern is that a one-size-fits-all ethical fund might be chosen by the government, but does not reflect the ethical concerns of a significant number of superannuants, so the fund or funds in question ought to provide that level of investment choice to superannuants. Again it goes back to the issue of the word 'ethical' being attractive, but under investigation means different things to different people.

Without prejudicing the process, perhaps the government will have to choose separate funds that score well respectively on the environmental ethics, social ethics and issues of conscience grounds, as indicated in my amendment, and then provide information for superannuants to make their own choice to the extent that they want their own money invested in those areas. I ask members to consider my amendment. It has been a popular addition to so-called ethical funds in the US where people do not want to invest in companies that promote pornography, for example, and this wording has been lifted directly from the legislation over there where it seems to have achieved that effect.

The Hon. SANDRA KANCK (21:13): I indicate Democrat support for this bill and commend the Hon. Mark Parnell for his repeated efforts to ensure that any superannuation funds covered by state laws have an ethical investment component. As he highlighted in his remarks, this is not a radical move but follows a trail blazed by many others around the world and in Australia. The main achievement in this campaign in Australia so far is the fact that the Victorian government has signed up to the United Nations principles for responsible investment. This means that its $40 billion worth of investments are to some degree shaped now by ethical considerations.

Members will also recall specific campaigns, particularly strong in regard to South Africa, to withdraw investment from companies operating in South Africa under the apartheid regime. For 30 years of my own life I had my own ethical investment stance in refusing to buy anything French as a result of its testing of bombs at Mururoa Atoll. The Democrats have a long history of fighting for ethical investment in the national parliament. In 2001 Senator Andrew Murray successfully amended the financial services bill to require ethical environmental and social considerations to be taken into account by fund managers.

I find it hard to see how anyone could argue against the bill because all it does is give investors more choice. Freedom of choice, as we are constantly told, is one of the foundations of our economic system. I have a very small amount in the Statewide Superannuation Trust as a result of some work I did some 20 years ago and I have moved that to what they call the socially responsive portfolio since it was made available.

As we have heard in this debate, Super SA's own research shows strong support for socially responsible investment. When asked, 'Would you choose to invest your super in socially responsible investments if that option were open to you?', 31 per cent of respondents said yes and 58 per cent said maybe.

A poll co-sponsored by PricewaterhouseCoopers and the St James Ethics Centre found 92 per cent of Australians believe that large companies should go beyond the minimum definition of their role in society, which is to employ people and make profits. And yet, as outlined by the Hon. Mark Parnell, the government has resisted this modest attempt to let public servants choose to invest their super in an ethical way.

This bill and the whole issue of ethical investment is an example of how to intelligently use mainstream market mechanisms to drive social and environmental reform. It is also an excellent illustration of the fact that economic mechanisms and processes are not value neutral. The blinkers and the bias that permeate other areas of life also exist and distort everything from super funds to corporate planning processes. So, today we are dealing with the blindness surrounding issues such as superannuation.

Last year, this parliament passed the statutes amendment equal opportunity bill, which redressed the discrimination against same-sex couples that was endemic in 80 different areas of life. We should continue to look for opportunities to make changes for good in the laws and institutions that govern our lives. This bill is one such step.

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (21:16): I do not intend to take up the time of the council: there are far more important things to debate. We discussed the issue in principle at some length in relation to the police superannuation bill, which is still before the House of Assembly. I know that the Treasurer is looking at these issues. The Hon. Rob Lucas spoke in some detail and I think summed up very well in his speech on the police superannuation bill some of the complexities that this issue involves—in particular, deciding what is ethical and what is not ethical investment. Obviously, what is ethical to one person may well be unethical to another.

The dilemma that I indicated during the debate on the police superannuation bill is that, if you do not have a significant number of people who wish to invest or who wish to be involved in such a scheme, it provides problems for the operators of the state superannuation scheme and, as I indicated during that earlier debate, it is likely that it would have to be outsourced to some other body that ran it and, of course, their definition of 'ethical' may not necessarily correspond with what the members of the state super scheme who wish to be involved in that sort of investment would like, anyway.

So, a number of issues are involved with this matter. As I said, I know that the Treasurer is considering those issues, and the government will have to make a decision with respect to the police superannuation bill. I believe it is premature to deal with this measure in finality until the Treasurer has made the decision. So, whereas I will not waste the time of the council in opposing the bill's second reading, if it does come to a final vote, the government will oppose it. At this stage, as I said, the government needs the opportunity of finalising its position in relation to the amendments which were moved to the police superannuation bill and which are now before the House of Assembly.

The Hon. M. PARNELL (21:18): I rise briefly to close the second reading debate. I wish to thank honourable members for their contribution, in particular, the Hon. Rob Lucas, the Hon. Dennis Hood, the Hon. Sandra Kanck and the minister. I particularly thank the Liberal Party, Family First and the Democrats for supporting this move.

I am disappointed that the government is not there yet. Clearly, this is an idea whose time has come. We know that it has come because other states have managed to do it and have overcome the difficulties that members have spoken about. I asked for this bill to be brought to a conclusion today because I wanted to strike while the iron was hot. I wanted to bring it back to the council while the memory of our discussion on the police superannuation was still fresh, and I thought we could dispose of it quickly. However, for the reasons that the Hon. Rob Lucas has mentioned, I am now prepared not to push it to a final vote today. I would like us to vote on the second reading, and we will make the committee stage an order of the day for the next Wednesday of sitting.

The additional words the Hon. Dennis Hood proposed be inserted appear at first blush not to create any difficulties. However, I will have a closer look at them, as will the Liberal Party, and we will come back in early June and see this vote through.

I very briefly remind members that the difficulty that many people have raised about what is ethical and what is not ethical and that to one person something might be acceptable but to others might not acceptable can be resolved; in fact, it has been resolved in many other jurisdictions, including state superannuation funds, where these principles are already in place.

I know the Hon. Dennis Hood said last time that he was keen for a whole of public sector approach, and I think that is the right position to take. As members would appreciate, we did not cover the whole of the Public Service last time because we were dealing only with the police superannuation bill. However, we did manage to pick up lot of public servants in that, because we had already amended the Triple S scheme. So, we now need to tidy up loose ends.

In particular, I am very excited about the fact that, if this bill gets the support of the council, I will be getting a letter from my superannuation fund (the Parliamentary PS3 Superannuation Fund) advising me that, among the seven choices it offered me last time, there will now be a new choice for an ethical investment option. I also make the point that we do not need this legislation for this to happen. This legislation can be seen as a 'hurry up' call to government. The government could have done this a long time ago, as other states have done, but it has chosen not to.

The government has surveyed public servants and asked them whether they would like the option of ethical super, and public servants have overwhelmingly expressed support for the idea; very few people think it is a bad idea. We know that few public servants exercise any election at present because none of them are particularly attractive to people. They are offered high growth or low growth, or various models of traditional investment, and most people do not bother making that choice. Most people just say, 'Oh, well, the one in the middle; we'll just take that.' However, they will be offered a choice that is more stark if an ethical investment option is available.

My feeling is that Funds SA and Super SA will probably enter into some relationship with an existing ethical superannuation provider and perhaps take a product off the shelf that meets the criteria of the legislation and offer that to members. It might not suit everyone, but it seems to me that having some ethical, environmental or, as the Hon. Dennis Hood prefers, conscience consideration, would be better than nothing; even if there were just a small number of companies that someone had trouble with, disagreed with or excluded, that would be a better outcome.

With those few words, I again thank members for their support. We will put this to a second reading vote now and make the committee stage an item of business for when we come back in June.

Bill read a second time.

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