ASB faces mass KiwiSaver defection over Gaza war, but investors’ sympathies are split

Sunday, 24 November 2024

Divestment campaigners from Justice For Palestine protesting outside ASB earlier this month.

About 2000 people have pledged to switch their money out of ASB’s KiwiSaver scheme on Friday, if ASB does not pledge to sell its stake in technology company Motorola.

The Justice for Palestine group has held protests outside ASB branches over the scheme’s investment in Motorola, which provides products and services to the Israeli military for use in border security and in what many countries see as illegal Israeli settlements in the Occupied Palestinian Territories.

If the protest group pulls off the mass-switch, it would represent a statistically bad day for the giant KiwiSaver scheme.

In an average day, based on 2023 switching data, ASB’s scheme sees just 52 people move their money to a rival Kiwisaver scheme.

But even assuming all 2000 moved, and each had an average KiwiSaver balance, it would still only equate to around $62 million, which is small beans to the ASB scheme.

At the end of September it had $17.2 billion in it, and more than 495,000 members.

The Israeli army says it will punish a soldier seen in a video circulating on social media firing a heavy machine gun indiscriminately in the Gaza Strip to celebrate Donald Trump’s election victory.

The very largest KiwiSaver funds are invested in a variety of assets, including shares in the world’s largest sharemarket-listed companies in the US, Europe, China and Britain.

Motorola is one of several high-profile US companies commonly invested in by KiwiSaver funds that has operations in Israel which are intolerable for activists horrified by the suffering of the Palestinian people in the war in Gaza.

The other is US equipment maker Caterpillar, whose bulldozers are alleged to have been used in the expansion of Israeli settlements in the Occupied Palestinian Territories, and in some instances “weaponised”.

“Does your KiwiSaver sponsor the daily human rights abuses against Palestinians?” asks a leaflet handed out by the Justice for Palestine protest group outside ASB branches.

Palestine protester Stella Raedt from Justice for Palestine hands out leaflets outside an ASB branch.

In June the Norwegian KLP pension fund, which is wealthier than every KiwiSaver fund put together, sold its stake in Caterpillar over its alleged contribution to construction of illegal Israeli settlements.

Two years earlier KLP had sold out of Motorola, which resulted in it being criticised by Israel’s government, which called the move “contemptible”.

Barry Coates, founder of the Mindful Money KiwiSaver research charity, says the settlements on occupied Palestinian territories have been declared to be a gross violation of international human rights law.

Foreign Minister Winston Peters said in September that New Zealand’s long-standing view remained that Israel’s presence in the occupied Palestinian Territory was unlawful.

The ASB protests have led to Green MPs asking questions in Parliament of bank chief executives.

But the bank is feeling singled out as many of the largest KiwiSaver funds are also invested in Motorola.

Others may not be invested in Motorola but have investments in Caterpillar. BNZ’s KiwiSaver continues to invest in three Israeli banks (banks the NZ Super Fund, New Zealand’s sovereign wealth fund, sold out of in 2021, saying they were helping fund building in the Occupied Palestinian Territories).

Of the 26 KiwiSaver funds with more than $1 billion invested in them, all but four owned shares in Motorola, Caterpillar, or both at the end of March, according to data gathered by Mindful Money.

And the NZ Super Fund has an investment in Motorola, though its head of responsible investment was not available to explain the decision to stay invested.

ASB chair Therese Walsh and chief executive Vittoria Shortt were questioned over ASB KiwiSaver’s investments in Motorola.

ASB is right to feel singled out.

Kate Stone, one of the Justice for Palestine organisers, said the group chose Motorola as the company it would focus on because it was on a list compiled by the United Nations’ Office of the High Commissioner on Human Rights of companies “involved” in activities in the Occupied Palestinian Territories.

And it chose ASB because it was a very large KiwiSaver provider, second only to ANZ.

A Palestinian child wounded in the Israeli bombardment of Gaza is treated at a hospital in Deir al-Balah in October. (AP Photo/Abdel Kareem Hana)

“We don’t want any of our money to fund Israeli settlements in the occupied territories, but what we are doing here is trying to win a campaign,” she said. To be winnable, a campaign needed to be focused.

“We are trying to send a signal that people don’t want these kinds of investments and, over time, we hope it will have a ripple effect,” she said.

However, she said BNZ was next in the group’s sights.

Already the signal has been received.

BNZ said its KiwiSaver Scheme was managed by FirstCape, which it is a partial owner of, and which set the responsible investment policy for the scheme.

Two women console each other after making a makeshift memorial as members of the Jewish community gather at a park in Sydney to mark the anniversary of the October 7, 2023, Hamas massacre of Israeli civilians and border guards. (AP Photo/Rick Rycroft)

“FirstCape has advised BNZ that it has recently completed its work on an extended Human Rights framework in its responsible investment policy. FirstCape is actively reviewing the holdings you have identified against this framework and expects that review to be completed in the next two weeks,” BNZ said in a statement.

For Stone, investing in companies associated with the occupied territories is an indictment of KiwiSaver managers’ claims to be responsible investors who respect human rights.

But research suggests it’s not as simple as that to New Zealand investors.

ASB says research from Talbot Mill shows 34% of people’s sympathies lay with Palestinians, but 21% lay with Israel, and the rest were not sure.

ASB said in a statement: “Since customers raised this issue with us, we have been reviewing our investments in Motorola Solutions against our framework.

“We are taking this matter seriously and it is taking us time to work through. Our review includes further engagement with our ESG research provider and underlying fund managers, as well as with Motorola Solutions, the United Nations, and the campaign organisers,” the statement said.

But, like many KiwiSaver schemes, ASB’s funds are managed by other companies under contract, using overseas researchers to screen companies for human rights concerns.

Israel’s Iron Dome air defence system fires to intercept a rocket fired from Gaza Strip in late October 2023.

“This structure is important because we invest on our customers' behalf and need to apply a transparent and unbiased approach to our funds and any investment decisions we make,” ASB said.

“We’re not able to make changes to our investments based on the personal views of our board, chief executive officer, or leadership team.”

Large American companies are often multi-national affairs with investments in many places, including in Israel.

Activists like Stone are sceptical about the true level of independence of some of those researchers.

In the US, pressure was brought to bear by a consortium of pro-Israel groups which felt the Chicago-based Morningstar Sustainalytics research company had an anti-Israel bias, presuming any company that did business in Israel was a risk.

In 2022 they scored a victory, Morningstar removed controversy ratings from more than 100 companies doing business with Israel.

In October 2022, Morningstar said it repudiated the Boycott, Divestment and Sanctions campaign against Israeli companies, and companies doing business in Israel, and would “continually work towards a goal of not having anti-Israel bias in sources and terminology and bolster in-house expertise with staff members focused on human rights and conflict zones”.

Currently, Sustainalytics rates Caterpillar as “medium risk”, and Motorola as “low risk” for investors.

“Sustainalytics used to say companies should not engage with Motorola, and now they do,” Stone said.

Exposes on the weapons investments of KiwiSaver begain in 2015.

Because KiwiSaver funds are massively diversified with thousands of companies invested in, ASB said the proportion of the investments across its KiwiSaver funds added up to about 10 cents in every $100 invested.

The campaign against ASB is dismissed as naive, inconsistent and pointless in some quarters.

One Jewish businessman The Post spoke with said: “Frankly, no one can boycott Israel. I mean, if you were to boycott Israel, you'd stop using Google Maps, and Intel-powered computers, and Microsoft products because Israel's technology tentacles spread everywhere.”

There has been a long-standing BDS campaign to have consumers boycott some Israeli products, such as Obela hummus, a campaign that began nearly 20 years ago.

“All of these boycotts are utterly ineffectual,” he said.

It may be naive to imagine that ASB deciding to sell some shares in Motorola would end the destruction and killing in Gaza, KiwiSaver managers have sold out of investments after public shaming.

After it was revealed many KiwiSaver funds were invested in companies making so-called “controversial” weapons like land mines and cluster munitions, which New Zealand had signed global treaties in a bid to eradicate them, and companies involved with nuclear weapons, KiwiSaver managers sold out of some companies.

The same happened with a great sell-out of tobacco company shares.

When Russia invaded Ukraine, ASB was among the KiwiSaver schemes to sell shares in Russian companies linked to the Kremlin.

On Friday, assuming ASB does not bow to Justice for Palestine’s divertment call, the 2000-odd KiwiSavers the group has recruited will have to choose where they transfer their money.

Given the very wide prevalence of Motorola and Caterpillar in KiwiSaver funds, they will have to take care in their choice.

They may also find themselves stumbling into other ethical conundrums. Of the four billion-dollar plus KiwiSaver funds that did not have investments in either Motorola or Caterpillar, three had a red flag from Mindful Money for having significantly higher-than industry normal exposure to fossil fuel investments.

Stone said Justice for Palestine was talking with Pathfinder KiwiSaver, which has a no weapons policy.

Pathfinder’s John Berry said: “We consider geopolitical risks when choosing investments for our KiwiSaver funds, and for this reason we don’t hold companies in Israel, Taiwan, Russia or Ukraine. Nor do we hold corporate bonds or government bonds in any of those countries.”

But the complexity of ethical investment is shown by Pathfinder’s history with Caterpillar.

It did have an investment in Caterpillar, but put it on its “companies of concern” list in December 2022 over reports its bulldozers were used to demolish Palestinian homes.

It then reconsidered its position in November last year, and sold out.