Trevor Sargent
Ceist:38 Mr. Sargent asked the Minister for Finance the ethical criteria that will govern the investment of moneys in the national pension fund. [23628/00]
Written Answers. - National Pension Fund.
I set out the position on ethical investment of national pensions reserve fund moneys in my reply to the Second Stage debate on the National Pensions Reserve Fund Bill on 11 October last.
As I said in my reply to the debate, I looked at a number of approaches to implementing an ethical investment mandate during the drafting of the Bill. However, I concluded that the best way to deal with the issue was to proceed with a commercial investment mandate and resolve questions on ethical investment through the accountability provisions of the Bill. The Bill requires the fund commission to report annually to the Minister for Finance and provides that copies of the report be laid before the Oireachtas. It also provides for the appearance of the chairman of the commission and the manager of the fund before the Committee of Public Accounts. These procedures will ensure that information on fund investments will enter the public domain and be subject to scrutiny by the Oireachtas. If an investment was not ethically or socially responsible and public pressure was brought to bear, I am sure the commissioners would take that into account.
There are a number of alternative approaches which I considered in this area. One would be to lay down strict guidelines and rules to be followed by the commission. However, it would be difficult to formulate any such guidelines as the question of ethical investment is only at an early stage of development internationally. In any event, there will always be intense public debate about what is ethically acceptable and there will rarely be consensus on such matters. I am opposed to the issuance of guidelines to the commission on a more general level also. If the commissioners operated subject to guidelines laid down by either the Oireachtas or the Minister, intense scrutiny of the fund's investment strategy, particularly in quarters or years where the fund has a negative return, could due to volume of public pressure, force the commissioners into a more conservative investment strategy. I am fundamentally opposed to imposing any restrictions on the commissioners which would interfere with their capacity to make strategic decisions in the best long-term interests of the fund and thus diminish the overall return on the fund and its contribution to future pension costs.
Other approaches which I considered include the use of the fund's voting rights to put pressure on companies to pursue ethical investments, the setting aside of a small portion of the fund's assets for investment in a separate ethical fund and screening which would exclude certain companies from indices being tracked by the fund. There are, however, drawbacks to all these approaches. The effective ness of a voting rights approach is debatable given that the fund's holding in any one company will be relatively small. The investment of a small portion of the fund's assets in a separate ethical fund would be largely tokenism and there would be significant operational difficulties with the screening approach.
Having considered these issues I concluded that the most effective and practical approach was to proceed with the commercial investment mandate and deal with ethical issues through accountability of the commission to the Oireachtas. This is the approach provided for in the Bill.