Complaints that investments by Guardians of New Zealand Superannuation in the disputed territory of Western Sahara are unethical failed in the High Court. The courts are unwilling to review broad policies of government-controlled organisations; courts will intervene if a specific decision is unlawful.
Guardians of New Zealand act as investment manager of government superannuation assets. It manages assets totalling $44.7 billion, according to its most recent annual report. Legislation requires Guardians to invest ethically, avoiding prejudice to New Zealand’s reputation.
Polisario Front for Australia and New Zealand together with Western Sahara Campaign New Zealand are the public faces of local support demanding independence for Western Sahara, an area defined by the UN as a non-self-governing territory. Previously under control of Spain, Morocco now exercises de facto control in the Western Sahara. The area holds substantial phosphate deposits.
In June 2016, Morgan Stanley flagged OCP bonds issued by a Moroccan state-owned phosphate company as raising potential reputational concerns for investors, given political tensions surrounding phosphate mining in disputed Western Sahara. Polisario said it was unethical for Guardians to hold OCP bonds. Guardians had moved in and out of the OCP bond market; in 2019, it held OCP bonds for four months. OCP bonds are on its ‘watchlist,’ Guardians told the court.
Polisario also criticised Guardians’ investments in companies operating in Western Sahara; predominately equity investments in European-based companies providing wind-based renewable energy and mining equipment, all utilised in the phosphate industry.
Guardians has developed and published a policy document; a responsible investment framework. As an equity investor, it is in a position to engage with management in those companies where there are ethical concerns, the Guardians said. Interconnected global markets means there are very few businesses that cannot be linked in some way through supply and customer chains to undesirable ethical practices. Too liberal an application of its responsible investment framework would exclude most investments, it said.
Judicial review procedures cannot be used to carry out a ‘merits-based’ review of Guardians’ investment decisions generally, Justice Woolford said. Judicial review was not available as a challenge to investments in all companies that simply operated in Western Sahara. There was no evidence that Guardians had failed to comply with its own responsible investment framework or had caused reputational damage to New Zealand. Guardians’ responsible investment framework properly complied with the New Zealand Superannuation and Retirement Income Act, Justice Woolford said.
Mohamed v. Guardians of New Zealand Superannuation – High Court (15.03.21)
21.050