In addition to maximising return without undue risk, the fund will avoid prejudice to New Zealand’s reputation as a responsible member of the world community, follow best practice portfolio management and to have an ethical investment policy. These requirements are addressed in terms of its Responsible Investment (RI) policy.

Our RI policies address activities that are illegal or contrary to international agreements to which NZ is a party. They extend beyond that to consider activities that are inconsistent with the Fund’s ethical standards, notably severe environmental damage, bribery and corruption and human rights abuses.

We believe ESG factors that are financially material will be reflected in values because investors recognise them as indicators of risk or quality. Positive ratings on ESG factors are normally associated with better-run companies and higher company value. Anticipating changes in material ESG factors for specific companies is a potential source of additional return for active managers. ESG factors also present reputational risks for FCP, which must be managed along with financial objectives.