AMNESTY INTERNATIONAL New Zealand Police Auckland Central Police Station ANNESTY INTERNATIONAL NEW ZEALAND 0 Box 5300 Delivered by hand WELLESLEY STREET AUCKLAND 1141 29th August 2016 0300 AMNESTY (256 3?8) inlo@amnesty.org.nz Complaint regarding Kiwisaver investments in prohibited weapons Investigations by Radio New Zealand and the New Zealand Herald show that Kiwisaver fund managers are investing client funds in cluster bomb, nuclear weapon and landmine producers. We refer to the attached briefing by MBIE on the applicability to KiwiSaver funds of legislation banning these weapons. The brie?ng notes that three Acts apply to Kiwisaver investment - the Cluster Munitions Prohibition Act (2009), the New Zealand Nuclear Free Zone, Disarmament, and the Arms Control Act (1987) and the Anti-Personnel Mines Prohibition Act (1998). We request that New Zealand Police investigate this matter urgently for the following reasons: 0 Any potential offences are treated as serious by New Zealand legislation (for example seven years' imprisonment under the Cluster Munitions Prohibition Act) There has been a great deal of interest, with widespread concern from the public Millions of New Zealanders' savings are potentially affected Delaying or not investigating would undermine public confidence in Kiwisaver The Minister of Commerce has noted that the Police is the appropriate agency to investigate We would appreciate being kept up to date with the progress of this complaint. Yours?faithfully I L) ?1 Grant Bayldon Executive Director Ph 021-737-533 grant. bayldon@amnesty. org. nz 5 A MINISTRY OF BUSINESS, INNOVATION EMPLOYMENT HTKINA WHAKATUTUKI BRIEFING KiwiSaver providers? obligations in relation to investments linked to l? weapons manufacturers 1? I. Date: 26 August 2016 Priority: Medium Security . Tracking -: classification: In commence number: 0567 16-17 Action sought I Action sought Hon Paul Goldsmith Note the contents of this briefing. - ugust 2016 Minister of Commerce and Consumer Affairs a \1-11 . -- Contact for telephone discussion (if required) (In; Name Position Tele no} 1st contact Manager, Financial g3: James Hartley Markets 9 (2) 9 (2) Policy Adviser is (2) The following departmentslagencieehqge been consulted Treasury El FMA DIA TPK MFAT [j MPI wig Ij DPMC MPP RBNZ . <9 v?El Other. I Minister's office tofo?mlete: Approved El Declined Noted El Needs change El Seen Overtaken by Events See Minister's Notes Withdrawn Co MINISTRY OF BUSINESS, INNOVATION EMPLOYMENT HTKINA WHAKATUTUKI $BRIEFING KiwiSaver providers? obligations in relation to investments linked to weapons manufacturers Date: 26 August 2016 Priority: Medium Security . Tracking a "i classification: In con?dence number: 0567 16?17 as?" Purpose To provide you with information on: 0 what legal obligations fall on KiwiSaver providers regarding inv$?ents linked to weapons manufacturers. and 0 what obligations KiwiSaver providers have to disclose infd?'?ation about their investments. Recommended action {a i The Ministry of Business. Innovation and Employmen\ commends that you: a Note the information below on KiwiSaver proyi??fs"obligations in relation to investments linked to weapons manufacturers and the attachedeai? factsheet. Noted James Hartley Hon Paul Goldsmith Manager, ?ning] ?Markets Minister of Commerce and Consumer .. . Affairs I .. I .. I .. 0567 16-17 In Confidence 1 Background 1. On Wednesday 17 August several media outlets reported that a number of KiwiSaver funds had exposure to manufacturers of cluster bombs, anti-personnel mines and nuclear weapons. 2. There is high public interest in this matter, and you have received several letters from members of the public expressing their concerns. 3. You have asked us to provide you with more information on: a What relevant Acts may apply What obligations those Acts set out What obligations exist for KiwiSaver providers to disclose information aboutf investments Legal obligations 4. We believe that three Acts apply to potential investments in weapon??lrtt?fanufacturers. We have not made any assessment of how New Zealand KiwiSaver rovitlers are complying with these laws. The Acts and relevant sections are set out below: The Cluster Munitions Prohibition Act 2009 5. The Cluster Munitions Prohibition Act 2009 implement at}: New Zealand domestic law the Convention on Cluster Munitions. The Convention visas 'gned by 108 countries and 100 have since approved, accepted, ratified or acceded to t. ?x 6. The Act sets out that not only is it an offenqe?ib?ke, deveIOp, possess, transfer or assist in the use, development, possession or trapsfer a cluster munition, but also specifies in section 10(2) that: is A person commits an o?e?qaiWho provides or invests funds with the intention that the funds be used, or it Eian that they are to be used, in the development or production of cluster i'nu itions. 7. Section 10(4) of the Ac also-sets out the penalty for breaching the Act, which is that a person who commits a\ Tot-fence of this nature is: \f liable to imprisonment for a term not exceeding 7 years or a fine not exc int} $500,000, or both. a" The New 23 Nuclear Free Zone, Disarmament, and Arms Control Act 1987 8. The Zealand Nuclear Free Zone, Disarmament, and Arms Control Act 1987 established a Nuclear Free Zone, to ?promote and encourage an active and effective by New Zealand to the essential process of disarmament and international arms {r ;_?gntrol?, and to implement in New Zealand the five treaties relating to nuclear and biological - eapons. The Act does not specifically discuss the investment of funds, however, section 5 of the Act states that no person shall: aid, abet, or procure any person to manufacture, acquire, possess, or have control over any nuclear explosive device. 10. Section 14 of the Act sets out the following penalty: Every person who commits an offence against this Act is liable on conviction to imprisonment for a term not exceeding 10 years. 056716-17 In Confidence 2 11. There are also regulations making it an offence to invest in, or deal with money in a way which could contribute to the development of nuclear weapons in Iran or the Democratic People's Republic of Korea. 12. These regulations give effect to two resolutions of the UN Security Council (Resolution 2231 (2015) and 1718 (2016)). The Anti-Personnel Mines Prohibition Act 1998 13. The Anti~Personnel Mines Prohibition Act 1998 implements into New Zealand domestic law the Convention on the Prohibition of the Use, Stockpiling, Production and Transfer of Anti- Personnel Mines and on their Destruction. Like The New Zealand Nuclear Free Zone, Disarmament, and Arms Control Act 1987, the Act does not specifically discuss the investment of funds. However, section 7 provides it is an offence to "assist, encou a?ggmr induce. in any way" a person to develop, possess or transfer to anyone an anti-p Kohnel mine. 14. The penalty set out in the same section is as follows: Every person who commits an offence against subsection (4 "r's'iiable on conviction to imprisonment for a term not exceeding 7 years or a fi 9 exceeding $500,000. Disclosure obligations -- . 1 - Disclosure of individual assets 15. All KiwiSaver providers that have transitioned to theQancial Markets Conduct regime (and all providers will have transitioned by 1 Decem (pf this year) are required to disclose a complete list of individual assets of each of ,th? funds on a six basis. Providers are required to include this information on thapis?close Register (which is available at .j 16. If the KiwiSaver fund invests in a r?i?drparty fund (which is a fund managed by the same person or an associated persont?tt're provider is required to disclose the individual assets within that fund. However, i theki?wiSaver Fund invests in an unrelated underlying fund, the provider is required to disc eke the investment in that underlying fund, and list that as the asset. 'f -. 17. For those KiwiSav rlpioviders that are yet to transition, the KiwiSaver Act 2006 and associated regula iqn?s impose very similar requirements, with the main distinction being that they are only [aggred to update their list of individual assets on an annual basis. Disclosure mo?p 10 investments 18. Undarji?ie'Financial Markets Conduct regime, KiwiSaver providers are also required to d'sc cite the 10 highest value individual assets that each of their funds invests on the ?lls? se Register. They are required to update that entry on a quarterly basis, and include (?tbs same information in their fund updates. 1 . Providers who are yet to transition to the Financial Markets Conduct regime are also currently required to disclose their 10 highest value individual assets on a quarterly basis. Statement relating to responsible investment 20. All KiwiSaver providers are required to provide a statement about whether their scheme takes responsible investment, including environmental, social, and governance considerations, into account in the investment policies and procedures of the scheme. 21. For those KiwiSaver providers that have transitioned, this statement will be found in their Product Disclosure Statement (a document which sets out the details of the Scheme's offer). 056716?17 In Confidence 3 Next steps 22. Over the next year we will be rolling out an investor portal, which will aggregate investment product information from registry data and potentially other sources and present it in a consumer~friend y and searchable manner. The portal will provide a smoother interface for investors to more easily access information about their investments. Annexes Annex One: Factsheet 056716?17 In Confidence Kiwi_Saver Factsheet What are the laws about investing in cluster munitions? The Cluster Munitions Prohibition Act 2009 implements the Convention of Cluster Munitions. That Act states that person commits an offence who provides or invests funds with the intention that the funds be used, or knowing that they are to be used, in the development or production of cluster munitions" (section What other laws are there about investing in weapons? The other laws that may apply to investment of funds are: the New Zealand Nuclear Free Zone, Disarmament, and Arms Control Act 1987: shall "aid, abet, or procure any person to manufacture, acquire. possess, or have - rol over any nuclear explosive device" (section - Regulations to implement two United Nations Security Council resolutions thsk? ke it an offence to invest in, or deal with money in a way which could contribute totin?svdevelopment of nuclear weapons in Iran or the Democratic People's Republic of Kore the Anti?Personnel Mines Prohibition Act 1998: it is an offence to "as encourage, or induce, in any way" a person to develop, possess or transfer to antzezi?e an anti-personnel mine (section 7). What regulatory authorities are responsible for upholding these gavijrs? The Police are responsible for investigations in respect of these ?x Are there ethical funds out there? Yes, a number of KiwiSaver providers currently offer socially rasponsible fund choices. The availability of such funds ensures that investors ta ta to invest in funds that align with their personal values. 9K How do investors find out what their KiwiSav {scheme is invested in? KiwiSaver providers have to make public a so "plete list of individual assets of each of their funds, on at least an annual basis. This list will includeiqoiirect assets through underlying funds related to the provider. Each quarter, KiwiSaver providers are re direct to disclose their top 10 highest value assets. KiwiSaver providers are also requiradato provide a statement about whether their scheme takes responsible investment, includi ign'vironmental, social, and governance considerations, into account in the investment policies angm dures of the scheme. The Sorted KiwiSaver also provides general information about KiwiSaver funds including fees and performance. "'15 Those investors ?lming more specific information, for example about the composition of index funds that their scheme may-invest in, should contact their KiwiSaver provider directly. ls Eyeing done to make it easier for investors to understand their KiwiSaver statement? MBIEQF njunction with the Commission for Financial Capability and FMA are currently reviewing the con his? annual statements and have been working directly with KiwiSaver providers on the review. A al statements can provide a personalised snapshot of a KiwiSaver member's investment and arch undertaken by MA has shown that there is already a high level of readership of these f} The aim of the review is to make the information provided to investors clear and easy to understand, and standardise key messages about retirement savings and figures across providers. The review has a particular focus on providing investors with information that will help them 'project forward' to consider the amount they will have when they retire and to make changes to their fund and contribution rate if necessary. We are aiming for changes to start to take effect in 2017 annual statements.