We are grateful for the opportunity to address the committee on short notice because we know it currently has a very heavy agenda. We do not have an anti-business agenda and it is important to note it is rather the opposite. Foreign investment in the poor countries where we work is absolutely crucial for the development of those countries. Whereas we work on the aid side in those countries, which is very important, it is equally important that economies are allowed to develop. There is as much a need as there is in Ireland for foreign investment in all the countries in which we work. We welcome that.
In some countries, specifically where there are very weak governance structures, transnational corporations may in some cases play an unconstructive role, particularly with regard to human rights, environmental and labour issues. There has been much movement in recent years in terms of looking at sovereign wealth funds, such as the National Pensions Reserve Fund. The Minister recognised this in setting up an interdepartmental committee to look at the investment of that fund and the role it plays. These types of fund are now playing a significant role in funding transnational corporations in-country.
We welcome the fact that the interdepartmental committee was set up. We made a submission which was made available to the members of this committee. It is a relatively brief document. Other NGOs and bodies also made submissions. At this point we know the interdepartmental committee has finalised its report, which is now with the Minister and is awaiting his review. Some legislation will be required with regard to the National Pensions Reserve Fund at this point. It is really important for the committee to engage with the process.
I will briefly speak on the four areas we referred to in our submission. The first relates to a responsible investment policy of active ownership where the investor — in this case the National Pensions Reserve Fund — would seek to promote better practice by these companies through dialogue. There is a system in place for that to happen but Trócaire's view is that it would need to be enhanced considerably, and there is a need for more depth on that front.
The second point relates to negative screening, whereby the fund can exclude certain classes of assets. Following the international agreement on cluster munitions which came to fruition in Croke Park, the pensions reserve fund, to its credit, divested from companies involved in cluster munitions. We must go further and look at issues such as single-use components for nuclear devices. We should not stop at cluster munitions and there is a need to go beyond that.
The key issue for us relates to exclusion, where the pension fund would divest itself of a particular company as part of due diligence mechanisms. It is particularly important to note that there has been much work done at UN level, with John Ruggie, the special representative of the UN Secretary General, having developed a framework on this which was adopted by the UN in 2008. The EU has also endorsed the framework. The framework, among many other things, refers to human rights "harm" that can be caused through acting on behalf of or under orders from the state, reflecting directly on the state's reputation. There is a reputational risk for the Irish Government or any government in this issue.
The framework points out that states are not automatically responsible for abuse by corporations of which they are not clearly and directly in control. Nevertheless, there is a responsibility to have due diligence systems in place and to prevent, investigate, punish and redress any interference with the human rights of any kind of people. Whereas there is no obvious case of governments or pension funds having control over companies, there is nevertheless a responsibility to investigate and act on those investigations. We see exclusion as key and there is a requirement for a change in the legislation for exclusion to be allowed.
The fourth area we referred to was positive selection, whereby investments would be made that meet agreed criteria on items such as renewable energy and other pro-environmental initiatives that have an overall positive effect on economies, etc. This would be enshrined in legislation. A very good example is the Norwegian model which spans all these fronts, and 1% of that fund contributes to positive selection. It is a good model to follow.
In summary, we are very happy there has been much background work done and the interdepartmental committee has produced its report and forwarded it to the Minister. We were very pleased to be able to make a submission to it and at this point it is particularly important that this committee, the committee dealing with human rights and the Irish Human Rights Commission should take note of what has been outlined and proposed. They should actively participate in the process for developing legislation, which is critical. This meeting is very timely.
We also recognise that any pension fund must see wise investment in order to have maximum gain for the State to meet the needs of society. In doing so, the State must recognise it has a responsibility to not be involved in supporting companies that may be in breach of people's rights anywhere in the world.