"Michael Cullen's new label for National leader John Key, "slippery John", might be a clumsy schoolyard taunt by comparison. But it has the potential to be far more deadly than its earlier incarnation, "trader John", which – with its currency trader connotations –"

TRACY WATKINS
The Dominion Post | Monday, 10 March 2008

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Below is a letter written by Michael Cullen, please take time to read it and answer the questions below:

Thank you for your e-mail of 22 February to the Prime Minister, seeking an explanation of the use of tax funds to invest in weapons. I gather that your concern relates to recent publicity about the New Zealand Superannuation Fund's investments in companies involved in the production of cluster bombs. As Minister with portfolio responsibility for the Fund, the Prime Minister has asked me to respond on her behalf.

New Zealand is in fact part of a small core group of countries leading work on a new treaty on cluster munitions which is being negotiated within the framework known as the Oslo Process. Negotiating a new treaty that would prohibit those cluster munitions that cause unacceptable harm to civilians is a key priority for the government, and was the focus of an international conference hosted by the New Zealand government in Wellington from 18 to 22 February. I understand a new treaty will be concluded by the end of this year.

With regard to your comments on the investment policies of the New Zealand Superannuation Fund, I should explain that by law the Fund operates at arm's length from the government.

In developing the legislation which governs the Fund, the government expressly decided that responsibility for determining its investment strategy should rest with the Board of Guardians of New Zealand Superannuation (the Board). These arrangements are designed to ensure that investment decisions are made by independent investment experts, free from political influences, and so enable the Fund to meet its important long-term objective maintaining Superannuation into the future.

The government also ensured, however that the legislation made provision for the Board to take ethical issues into consideration in making its investments.

Under the legislation, the Board is required to invest the Fund on a prudent, commercial basis, in a manner consistent with best-practice portfolio management, maximising return without undue risk to the Fund as a whole, and avoiding prejudice to New Zealand's reputation as a responsible member of the world community.

I understand the Guardians have determined that best-practice portfolio management required broad diversification of investments. The Fund's investment strategy includes holding investments benchmarked to global market indices. On 30 June 2007. the Funds portfolio held direct investments in over 3,000 listed companies, providing diversification across most of the world's countries and industries. Inevitably, some of the companies will give rise to social and environmental concerns.

Reflecting this concern and in line with the legislation, the Board has adopted a Responsible Investment Policy which is reviewed and updated annually in its Statement of Investment Policies Standards and Procedures.

The portfolio monitoring process implemented by the Board under this policy uses the UN Global Compact as a benchmark for corporate behaviour. The Guardians are also a founding member of the UN Principles of Responsible Investment (UN PRI) which provides and appropriate framework within which institutional investors can work together.

Where a stock within the portfolio is identified as having practices that fall significantly short of the principles set by the UN Global Compact, the Fund may elect . The Board believes that the Fund can have a greater impact on company practices through dialogue with company management than through divestment, particularly when this is done collectively with other shareholders. The Board may, however, still chose to divest from a company where all efforts to engage fail; in the past the Fund has taken action in regard to anti-personnel mines, whale meat processing and tobacco.

The Board recently announced that it is undertaking a responsible investment review of investment in companies involved in cluster munitions production. You will appreciate that it would not be appropriate for me to seek to influence the outcomes of the review. However the board is closely following the current discussions on a new treaty on cluster munitions, and I understand that developments in regard to the treaty will be taken into account in the course of the responsible investment review.

It is of course open to you to make a direct submission to the Board of Guardians should you so desire. Correspondence should be forwarded directly to the Board of Guardians, at PO Box 106607, Auckland.

Once again, thank you for writing and sharing your views.

Yours sincerely

Hon Dr Michael Cullen
Minister of Finance

1. Is it best-practice policy for a government to host and engage in initiatives (the Oslo Process) working against economic growth of the Superannuation Fund?

2. Is it best-practice to host these initiatives?

3. is cluster bombing categorically just one of many 'social and environmental concerns'?, or is this simply the humanitarian standpoint of Hon Dr Michael Cullen?

4. In what manner should the Superannuation recipient best appreciate that it would not be appropriate for Hon Dr Michael Cullen to seek to influence the outcomes of the review.

5. how will investment in weapons production alleviate prejudice to New Zealand's reputation as a responsible member of the world community?

6. In relation to this single issue, how relevant are the Prime Minister's adjurations for citizens to question the National Party's
lack of coherent policy?

7.
a. In what way is funding weapons manufacturers whilst encouraging improvements in the manufacturer's policies and practices preferable to not funding weapons manufacturers?

b. To what extent will this enhance the NZ Superannuation experience?

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"the National Party doesn't stand for anything , the National Party only stands for power"

Rt Hon. Helen Clark.
2008