John Downeslooks at the make-up of the National Pensions Reserve Fund's €19.3 billion investments
THE NATIONAL Pensions Reserve Fund (NPRF) plans to continue investing in companies operating in areas such as tobacco, alcohol and defence manufacturing.
This is despite its recent decision to withdraw €27 million in funding from manufacturers of cluster munitions.
A spokesman for the €19.3 billion fund said the cluster munitions decision was made "in very particular circumstances" on foot of a specific request from Government and in light of the latter's efforts "to conclude a legally-binding instrument to prohibit cluster munitions".
He said the NPRF commission's investment mandate was to invest the fund "so as to secure the optimal financial return, provided the level of risk to the monies invested is acceptable to the commission".
"The mandate is not qualified by any ethical investment criteria."
The fund was set up in 2001 by the Government to finance the State's future pension requirements. This has led it to invest in some 2,500 companies worldwide, including many of the world's most recognisable brand names.
However, last March it emerged that the fund planned to withdraw investments from six international companies listed as being involved in the production of cluster munitions. This followed strong pressure from Minister for Foreign Affairs Dermot Ahern, who has been actively involved in the cluster munitions issue.
At the time the fund's spokesman said five of the companies involved were US-based: Raytheon, General Dynamics, Lockheed Martin, Alliant Techsystems and L3 Communications. The sixth was a French company Thales.
A major international diplomatic conference on cluster munitions is scheduled to take place at Croke Park this month.
The NPRF commission's most recent annual report reveals that, by the end of December 2006, the fund had invested in a wide range of companies around the world on behalf of the Irish taxpayer.
These include manufacturers of alcohol such as Pernod Ricard (€27 million), Heineken (€29 million), Guinness brewer Diageo (€15 million), Budweiser manufacturer Anheuser Busch (€10 million) and LVMH Moet Hennessy (€43 million).
In the defence and aerospace sector, the fund has invested in BAE systems (€14.5 million) and €19 million in Boeing.
The fund also invests in oil and/or energy companies, including €41 million in British Petroleum (BP), €9 million in the nuclear power producer British Energy, €46 million in Chevron corporation, €61 million in Royal Dutch Shell, and €3 million in Halliburton, which has links with US vice-president Dick Cheney.
It has also invested in cigarette manufacturers British American Tobacco (€4 million), Imperial Tobacco (€2.5 million) and €33 million in Altria, the parent company of Philip Morris.
Although the investments in question sometimes run to tens of millions of euro, they generally represent only a tiny proportion of the fund's overall investments.
The fund spokesman noted that it was a founder signatory to the UN Principles for Responsible Investment in April 2006, which seek to promote responsible investment in companies.
However, he said that responsible investment is "somewhat different" to ethical investment, in that it is concerned with "integrating the consideration of Environmental, Social and Governance (ESG) issues across all of a fund's investments," thereby improving long-term returns.
By comparison, ethical investment has traditionally focused on the "exclusion of particular stocks or sectors or, in some circumstances, actively investing in particular stocks or sectors".
The fund has focused the implementation of its responsible investment policy and the UN principles on the development of a "comprehensive proxy voting policy and an engagement capacity with investee companies".
"It appointed Hermes Equity Ownership Services in July 2007 to execute proxy votes on the fund's behalf and to engage with companies on ESG issues across its global equity portfolio," he added.