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Irish committee to examine NPRF ethical issues

IRELAND - The government has announced it is to establish an “interdepartmental committee” to examine the possibility of introducing ethical investment guidelines for the National Pension Reserve Fund (NPRF).

In a debate at the second reading of the ‘National Pensions Reserve Fund and Miscellaneous Provisions Bill 2009’ - allowing money from the NPRF to be used to recapitalise banking institutions - Brian Lenihan, the minister for finance, said the new legislation “provided an opportunity to consider once again the position regarding ethical investment”.

He told members of the Dáil Éireann, the lower house of the Irish parliament Oireachtas, that when the NPRF was established in 2001 it was decided an ethical investment policy would not be appropriate or practical as it would constrain the fund’s investments.

The NPRF was therefore given a “commercial investment mandate without an explicit ethical component”, but since then Lenihan acknowledged there had been significant debate and “considerable developments in thinking in this area” with the NPRF Commission implementing a “number of initiatives to integrate environmental, social and governance (ESG) considerations into its management of the fund”.

He added: “In the light of this ongoing debate and having regard to the experience of other countries with sovereign investment funds, it is my view that this matter requires further consideration.”

However, the minister warned because of the “sensitive and urgent nature of the legislation now required to facilitate the recapitalisation of the financial institutions and the complexity in drawing up a responsible investment policy that will work in practice, it would not be appropriate at this time to include such a provision in this [NPRF] Bill”.

Instead, he stated in an attempt to “advance matters, I will establish an interdepartmental committee to examine the issues further. The group will report to me within three months of its establishment and will be open to receiving the views of interested parties”.

The announcement was welcomed by Progressio Ireland, an independent development agency, which in July 2008 highlighted and criticised the level of NPRF investments, estimated at €575m, in companies with operations in Zimbabwe. (See earlier IPE articles: NPRF under pressure over Zimbabwe investments; NPRF to raise concerns over Zimbabwe investments; Dáil to grill NPRF over Zimbabwe and Ireland to review ethical investments)

Emmet Bergin, advocacy officer at Progressio, said: “At last the National Pension Reserve Fund will soon cease investing in companies that contravene basic human rights, trade in war and destroy the environment.”

He pointed out the “narrow investing criteria” adopted by the NPRF is “no longer appropriate and that investment decisions must be informed by a much greater concern for corporate behaviour. The introduction of ethical guidelines will mean that we can at last match the level of ethical investing of other public pension funds in Europe and New Zealand”.

The Bill will also amend the existing Act to allow the minister of finance to direct the NPRF Commission to make investments to credit institutions listed on a stock exchange and underwrite their share issues, and to give directions on the holding, management and disposal of such directed investments.

Lenihan confirmed the Bill also includes an “enabling measure” in case the NPRF Commission should need to “underwrite a capital raising issuance by a financial institution”, although he stressed “this is not something I propose to do; I am merely taking the opportunity to include the provision on a contingency basis”.

However Olivia Mitchell, from the opposition Fine Gael party, warned the legislation is “little short of cataclysmic” as it is asking parliament to “raid that fund [NPRF] in order to save the banks”, and highlighted members are also being asked to “purloin the contributions for the next two years, amounting to €3bn”.

Elsewhere, the pensions debate, which is scheduled to conclude in this evening’s session, follows further protests by civil service workers over the introduction of the ‘pension levy’ that was approved by parliament last week. (See earlier IPE article: Dail passed pension levy ahead of first strike)

The Services, Industrial, Professional and Technical Union (SIPTU) has initiated a series of protests by local authority members that began with a march Leitrim County Council workers on 2 March, to be followed by a further protest in Swords, County Dublin on 9 March. 

Ramon O’Reilly, SIPTU branch organiser, said the campaign not only targets the government but also aims to inform the public about the “serious anomalies” in the levy particularly in relation to lower paid workers, as “someone earning €510 a week pays 4% of the gross salary while some earning €800 only pays 3.7% because of higher tax relief”. 

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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