Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Thursday, 13 September 2012
Page: 6845


Senator DI NATALE (Victoria) (11:29): I am very pleased to have the opportunity to speak today on this bill. It is a bill that was crafted to ensure that public funds are invested ethically and not counter to the wishes of the Australian community, invested in a way that does not undermine Australian public policy. It is an idea whose time has come. It is not a controversial idea and it is why I have brought this bill to the parliament.

The bill sets out to improve the Future Fund. The Future Fund was created in 2006 in order to set aside money to cover the government's unfunded superannuation liabilities. It currently has about $80 billion under management and is expected to grow to about $140 billion by 2020. The Future Fund is already the 13th-largest sovereign wealth fund, with the other nation-building funds being the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund, which add another $17 billion to the total. It is a lot of money in anyone's book, and investing it is a very important task. It is big enough to move money markets, and that is why the fund's investments are overseen by a board of guardians who are independent of government. I will talk about that more in a moment.

We agree that the fund must remain independent of government. We know that when the returns do eventuate we want the money to be there, soundly and prudently invested. But at the same time we acknowledge that a pool of this size has a lot of power and the power could be used for good, for neutral purposes and also to do harm. The Greens do not think the Future Fund should be a primary vehicle for creating social change, but we understand that it is proper and right that the fund be a neutral actor in the financial markets, able to make long-term investment decisions independent of political agendas.

But what if the fund's investments are actively creating harm? As a responsible government we are obliged to ensure that any harm we are causing is minimised, whether that be direct or indirect harm, and that is what this bill does. It does not give government veto power over all investment decisions; it merely obliges the Future Fund to consider potential harms when making investments. It is not an abstract concept; we believe that some of the fund's investments are already causing harm. They are doing so by supporting and profiting from industries that have a strong negative impact on the wellbeing of Australian citizens and citizens right around the world.

So which of those investments are problematic? The most glaring example is tobacco. At last count the future fund had over $210 million invested in tobacco. It includes $55 million in British American Tobacco, $44 million in Philip Morris and $48 million in Lorillard—a horrifying set of numbers. Australia has been a world leader in tobacco control. The government are to be congratulated for the leadership they have shown in this area, and I was proud to support the plain-packaging legislation that came to this parliament last year. It will save lives, and it was only last month that it survived a High Court challenge—a challenge that came from these very same companies that we are investing in. The fund is investing in companies that sued the Commonwealth for the right to more efficiently kill its citizens.

Tobacco kills 15,000 Australians every year. It costs the country over $30 billion per annum in direct and indirect costs. That includes $600 million in direct hospital costs, which is just the beginning of the burden it puts on the health system. The situation is worse overseas and is getting more serious by the day. Almost a third of men worldwide still smoke, and it is a habit that will kill half of them. It is in the developing world that tobacco use is on the rise. We have laws that are lax, unrestricted advertising and very low taxes, and the real growth industry is in young people.

Every day up to 100,000 young people start smoking somewhere in the world. Indonesia has a famous customer: a young boy who at the age of four years has a pack-a-day habit. It might seem sensational, but he is not alone. Two per cent of smokers start at the age of four in that country, and many more begin by the age of 10. It is no surprise that the filters on these cigarettes have sweetened tips. When those tobacco shares pay dividends, this is where the money is coming from.

Since I started this speech, many, many more people will have died. As a medical practitioner, I have seen the pain, suffering and fear in a person's eyes when they are told they will die because of their addiction to nicotine. It kills people and destroys families, and it is no wonder the medical profession is so strongly in support of this bill.

It is important to look a little bit at this industry that we are investing in. Since its creation, its primary objective was to manufacture doubt around its own product, so it relied heavily on scientists with guidance from industry lawyers and PR experts to manufacture doubt about its product. These guns for hire, some of them willing, who believe that any regulation in the marketplace is a bad thing even if people are dying, cause many more people to suffer. We have now seen millions of pages of documents released during tobacco litigation which demonstrate the links between parts of the scientific community and the PR community, and they show the crucial role that these guns for hire played in sowing doubt about the links between smoking and cancer. It is interesting that the same sort of strategy—the tobacco strategy—is being applied to a number of other issues, including environmental issues like global warming.

The industry's position was that there was no proof that tobacco was bad, and they manufactured a debate convincing the media that it had an obligation to present both sides of the debate. They made sure the industry got facts. The so-called 'balanced campaign' involved aggressive dissemination and promotion to editors and publishers of information that supported the industry's position. The appeal to journalistic balance as well as perhaps the industry's large advertising budget resonated with writers and editors right around the world. They produced junk science to undermine peer reviewed real science and, much like global warming, they were successful. In 1964, when the Surgeon General of the United States produced a report that unequivocally said that smoking was bad for people and that it killed them—a report based on 7,000 scientific studies—you would assume that the industry would have said, 'We're beat.' But no. How did it respond? More denial. The industry stated: 'There is no scientific evidence that cigarette smoking causes lung cancer or other disease.' It was a case of white is black and black is white. They fought harder. They redoubled their efforts to challenge the science. They changed the name of their industry fund to the Council for Tobacco Research—dropping the word 'industry'. They then funded many more handpicked scientists and sponsored a number of medical institutions.

In 1965, when congress decided to put warnings on tobacco packages and advertisements, the tobacco industry responded with a parade of dissenting doctors. In 1969, when the American Communications Commission decided to ban cigarette advertising, the industry again responded with: 'There is no demonstrated causal relationship between smoking and lung cancer.' They were ultimately found guilty of lying, in part because the trail of PR documents showed very clearly that they knew the dangers of smoking as early as 1953 and had conspired to suppress that knowledge. They conspired to fight the facts and, in the words of one author, 'merchandised out'. But it took a long time for those facts to emerge and, in the intervening years, when the community believed that there was reasonable doubt around the harms of smoking, people died. It was not until the 1990s that the industry began to lose court cases. And it was not until 2009—more than half a century after the tobacco industry itself knew of the damage it was causing—that tobacco was finally regulated as an addictive product in the United States

The international community would applaud us for divesting ourselves of tobacco, and we have an obligation to do so. We have signed on to a framework convention on tobacco control, which states very clearly, 'Parties should not invest in the tobacco industry and related ventures.' Despite all of this, there are people in the investment community who say that tobacco is a good investment, that profits from it in the developing world are growing and that many people, especially women, remain unaddicted to it. But the reality is that tobacco is a sunset industry. The trail of death that it leaves in its wake makes it an unsustainable business. We simply cannot afford to continue investing in this industry. We cannot support it. It is unthinkable that we send any more public funds its way—funds that come at the expense of its victims. This investment is irresponsible. It undermines our work on tobacco control and makes a mockery of our treaty obligations. It is unsustainable and unethical and the public want it to stop.

Tobacco is one part of the Future Fund of which we must divest ourselves, but it is not the only one. The fund has substantial investments in companies that make nuclear weapons. According to analysis by the International Campaign to Abolish Nuclear Weapons, the fund has over $133 million invested in companies involved in this industry. Given Australia's goal of a world without nuclear weapons, it is hard to see how these investments do not put us in a position as absurd as our position is on tobacco. The fund's investments also risk a conflict with our important foreign aid programs. As we invest in combating non-communicable diseases in the Pacific, the companies in which we invest are selling people cigarettes. As we invest in and push for human rights, labour rights and stronger environmental protections in our region, we are investing in companies that are exploiting workers and bulldozing rainforest in those countries.

This bill makes it plain as to the reason we need ethical investment guidelines. The bill directs the minister to provide some ethical investment guidelines to the Future Fund. It would mean that the fund would be obliged to consider the investments it makes against a set of guidelines to be developed by the minister in conjunction with the fund. The fund already has some limits on what it can invest in. It cannot invest in businesses that are illegal in Australia, no matter how profitable they may be. You might make money out of investing in a cocaine cartel or gun-running but it is good to know that Australian taxpayer dollars are not going to fund them. It is worth noting that the fund has already divested itself of some investments for this very reason. Because Australia is a signatory to the Convention on Cluster Munitions, manufacturing or deploying these bombs would be illegal here. So the fund divested itself of these stocks; it divested itself of the companies that make these deadly weapons. This is as it should be, and I congratulate the fund for taking that decision. The divestment set an important and welcome precedent. The government did not tell the fund to get out of cluster munitions. The fund made that decision as one that is compatible with its mandate and its responsibilities.

It is true that the government cannot tell the Future Fund what to invest in. The board of guardians manage the portfolio and do not take orders from the minister on whether any investment is good or bad, either in the long term or the short term, and whether it is ethical or unethical. However, the fund does take some direction from the government, and this is by way of investment mandate. Under the act, the relevant ministers may provide the board written guidance and, indeed, must do so. The current mandate invested in 2006 specifies the returns the fund should aim for and the level of risk to take. It states that the board must have regard to international best practice with regard to corporate governance, including its voting policy

Unfortunately, the mandate does not also state that the fund must balance its quest for returns with investment policies that do not harm Australia and the world. I have no reason to believe that it could not do that. Nevertheless, the mandate does provide an example of government direction that is hands-off and divorced from everyday investment decisions.

Given that the board must consider the mandate when devising an investment strategy, they could also have some guidelines around an approach to responsible investment—and that is what this bill does. It does not go into any detail about the ethical investment guidelines that the board must follow. It is up to the minister and could be as simple as instructions that the fund must follow world's best practice regarding the ethical implications of its investment. The bill, however, does specify that some investments should at a minimum be covered by the guidelines and that the fund should divest itself of these investments. They are: tobacco, cluster munitions and nuclear weapons. It is not a long list; in fact, it is a very short list. It could operate in the same way as the investment mandate currently does at arms-length from the government.

It is not an unusual thing for a sovereign wealth fund to do. There are precedents right around the world. Government and non-government institutions, our funds, are increasingly developing responsible and ethical investment practices that are very robust and yet do not compromise the returns that funds are making. Norway's government pension fund, for example, is a sovereign wealth fund similar to the Future Fund. It is leading the world in this area. It has gotten out of tobacco, divested itself of stock in mining companies and nuclear weapons are out—yet, by all accounts, the fund does well. In our own region, the New Zealand superannuation fund has had a responsible investment policy for some time. It began divesting of tobacco in 2007 and cluster bombs in 2008.

There are precedents here in Australia. To their credit, the ACT government, in large part due to pressure from the Greens, just last month put in place guidelines that will see it divest itself of tobacco, cluster bombs and landmines. New South Wales may be next. In the private sector there is also momentum. On 1 July First State Super announced they have excluded tobacco companies from their portfolios. There is ample precedent for what this bill sets out to do. If anything, Australia's nation-building funds are lagging behind.

The fund claim to have policies that already do this, that are sufficient. They claim rigorous ownership rights and environmental, social and governance policy. But, in their evidence given to the inquiry into this bill, they claimed that they use their power as investors to work with companies and improve their record on these issues. I am not an expert in this field of investment, but I do fail to see how a policy can be sufficient, let alone best practice, if we have a third of a billion dollars invested in tobacco and nuclear weapons.

Of course, the fund have raised the issue of independence and, as I have said previously, I do believe that independence is important and appropriate. But I remain unconvinced that a set of guidelines would somehow compromise this independence. I appreciate that investments are complex and it may add some small complexity to our relationships with third-party fund managers, but it is a small price that is worth paying. We understand that the fund, through this bill, should be consulted—and it will be. I would be perfectly happy to see the fund consulted and it itself develop some guidelines around its ethical investment responsibilities. The bill makes it explicit that this should happen. I note that, if the bill is passed, it will not cause any disruption to the fund and that the existing portfolio has 12 months to dispose of any important investments that conflict with the new guidelines.

This legislation would resolve the preposterous conflict that exists between the Future Fund's global investments and Australia's global tobacco reform agenda. It brings Australia up to par with world's best practice regarding responsible and ethical investment. That is the problem that brings us here today. The Future Fund should be at arms-length but it is public money invested and it is a public institution. That fact alone obliges us to consider the implications of its actions. It is a tool that exists to achieve a specific aim—to take a liability off the budget books. The fund should be independent but only as independent as it needs to be to meet this goal. It should seek profits only in so far as they help to balance the ledger. If we cannot do that without causing harm in other countries, how can we endorse this enterprise? Luckily, the choice is easy. A responsible investment is not contrary to profitable investment and this bill finally aligns both of those goals.