This article was first published on The Drum website.
The job of the Future Fund is to reduce the burden upon taxpayers. Its board is comprised of some of the wisest fund managers in the land.
Yet the Greens think politicians know better. They have sought to use Parliament to dictate which companies should and should not be invested in.
Advocates of socially responsible investment practices encourage fund managers to direct their wealth towards companies which, for example, protect endangered animals and away from those which run casinos or make wine.
Similarly, ‘social licence to operate’ is a term used by those who advocate conditions on investment in certain industries as they try to use capital markets to pursue political objectives.
For those with private funds, this is a perfectly legitimate choice to make. They are the commanders of their own destiny; they can invest their funds in a way that chases the highest possible returns or they can invest their funds according to other motivations. Private funds will thrive or fail, depending on the attitudes of investors.
There is a difference, though, between private funds choosing to invest in a particular manner and banning or mandating government funds to behave in a certain way.
Such mandates on public funds in the private investment market have the potential to dramatically increase the power and influence of lawmakers and bureaucrats in our economy and society.
The Greens think they know better when it comes to investing and managing the funds that will eventually pay the billions of dollars of public servants’ superannuation liabilities. They do not trust the judgement of people like Investec Bank and Coca-Cola Amatil chair David Gonski, former federal treasurer and Future Fund creator Peter Costello, and funds management expert Susan Doyle.
The Greens also do not trust the staff at the Future Fund whose job it is to ensure that investments adhere to best practice. Far from ignoring ethics, Future Fund officers recently told a Senate committee investigating the Greens’ proposals that they already impose a three-stage test before investing. They ask, is the investment legal? Does it adhere to Australia’s treaty obligations? And do the economic activities of the company being invested in contravene Australia’s treaty or convention obligations?
For the Greens though, this is still not enough. They want the finance minister to dictate to the Future Fund board exactly which investments it must avoid, and they want the Future Fund to relegate the rate of return to taxpayers down the list of investment priorities in order to achieve their own political objectives.
Forget investing in tobacco – a perfectly legal product. Forget investing in companies that produce legal weapons, or even aeroplanes and IT products. The Greens want to be able to deem certain activities forbidden, and then use your money to achieve their political and social objectives.
And beware, for it is only a small step from banning particular investments to mandating others. The prohibition of certain companies from investment will very quickly become a direction or compulsion to fund others, all in the name of some nominated social good of course. It might be tobacco or Boeing banned today, but who trusts the Greens not to try to ban BHP or Rio Tinto because of their coal mines tomorrow?
Of course, the Future Fund does not seek out these industries or companies for investment. But when fund officers recommend that these industries will provide the best rate of return for taxpayers, who will otherwise have to stump up tens of billions of dollars in higher taxes in coming years, the Greens want to overrule this.
The cost of the Greens self-appointing themselves as fund managers will be borne by every Australian. Remember, the Future Fund was only set up to fund tens of billions of dollars of liabilities already accrued. Every dollar that is sacrificed to the Greens’ preferred cause is another dollar of tax that Australians will have to pay.
The Greens think politicians know best, but it is time someone told them the truth.