Week in Review

Super Fund corrals $13trn for livestreaming action

How the NZ Super Fund has drummed up $13 trillion to put pressure on Facebook, Twitter and YouTube giants over livestreaming following the Christchurch terror attacks.

In the weeks following the March 15 Christchurch mosque attacks, shocked Kiwis called for government action against the biggest global social media companies over the live streaming of the killings.

But it’s unlikely many of us were mulling what our future superannuation provider should, or should not, be doing about the social media horror.

Katie Beith was.

Beith has the sort of title the rest of us would struggle to live up to: senior investment strategist for responsible investments at the New Zealand Super Fund. It’s her job to monitor the fund around no-nos like cluster bombs, tobacco and whale meat, but also to highlight emerging issues that have the potential to impact investments. It might be modern slavery, palm oil, or carbon emissions.

After Christchurch, Beith and other Super Fund leaders, including year-into-the-job boss Matt Whineray, found themselves thinking about a new investment dilemma - the role of listed social media giants like Facebook, Twitter and YouTube (via its owners Google and Alphabet) in distributing the hideous shooting video.

The NZ Super Fund and other New Zealand fund managers all had shares in these big companies. Should they get rid of their shares, sell down their holding? Or could they try something bigger, more hairy and audacious?

Could they bring enough investors together to help persuade the social media giants to do something to stop the live streaming and distribution of objectionable content in the future?

If we were going to have any chance of success, we needed to bring people together.

In New Zealand terms, the Super Fund has a fair bit of financial clout - as of the end of March it had over $41 billion invested to help meet New Zealand’s ballooning future superannuation needs.

But globally, $41 billion is nothing. Facebook alone is worth $45 billion. And that’s US dollars. “We know we are a tiny, tiny fish on our own,” Beith says. “We knew that if we were going to have any chance of success, of even getting our feet under the table and having a voice with the big social media companies, we needed to bring people together.”

NZ Super Fund's Katie Beith and Matt Whineray. Photo: Nikki Mandow

So Beith and her colleagues made a few phone calls; sent a few emails. And then a few more. Starting locally and expanding internationally, NZ Super Fund people started asking their contacts at other big investment funds whether they were interested in joining the movement.

Many of them were.

As of this week, 85 funds from Europe, America, Australia and New Zealand have joined the fight. Between them they have more than $13 trillion-worth of investment under management.

$13,000,000,000,000.

These include Britain’s Local Authority Pension Fund Forum, Sweden’s AP funds, which manage the assets of their national retirement system, and most recently, the massive Legal & General Investment Management. The latter added $2 trillion of assets in one go.

“When you have those powerful organisations with you at the table and supporting you it gives you a better chance of success,” Beith says.

Separately together

The aim is for the 85 funds to work together and separately, to get the social media companies to stop unacceptable live streaming, she says.

“The whole 85 aren’t all talking. A lot of these organisations already have their own relationships and are also engaging. So it’s about aligning the messages, making sure we are all giving a consistent message.

Super Fund CEO Matt Whineray isn’t ruling out selling some or all of the Superfund’s holdings in Facebook, Twitter and YouTube (via its listed owners Google and Alphabet).

But he says that would be a last resort.

“As soon as you don’t own shares you are a lot less powerful as a voice.”

He reckons the message to the social media companies is stronger when it’s coming from investors as well as governments and customers.

But it’s not just about ethics - it’s about investment risk, he says. If customers lose faith in Facebook, Twitter or YouTube, or if the companies face huge financial payouts, investors will lose out.

Think Enron.

We don't think you should be harming your customers.

“These social media companies provide a valuable service and they are part of our portfolio, but we want them to operate in a way that’s going to be sustainable in the long term. And we don’t think it’s particularly controversial to say ‘We don’t think you should be harming your customers’.”

The Super Fund has a narrow focus - it’s not pushing against privacy or governance, Whineray says. Just live streaming.

“We want them specifically to deal with this issue and we think that’s eminently capable of being solved and it’s in the interest of these companies to do that. We are making sure they know in no uncertain terms that we are expecting improvements.”

What improvements?

That was a tough question to answer, Beith says.

“The hard bit was working out what our expectations are for change, because it’s a pretty tricky area. We did a lot of research to figure out what we could expect the companies to do to strengthen their controls.”

What happens now?

Beith is circumspect.

“Engagement has started,” she says, “but we are not disclosing information on the conversations we’re having because we want to foster an open and genuine engagement.”

And if you are looking at quick results, you’ve got the wrong group. After all, the Super Fund is a long term sort of an organisation. Like it isn’t even thinking about starting giving its money away until the mid-2030s.

“Engagements tend to take a while,” Whineray says. “These are big organisations, so if you want solutions to be enduring you’ve got to end up with the right decisions. Some of our engagements take years.”

Benevolent bullying

As Whineray hints, shareholder lobbying is nothing new, but international investor pressure on corporates has increased in the decade or so since the United Nations-supported investor network PRI (Principles for Responsible Investment) was set up in 2006.

At the moment the NZ Super Fund is also involved in two other global projects. One is called Climate Action 100+, a group of shareholders recently described by Bloomberg Businessweek as “the biggest, richest, and possibly the most benevolent bully the corporate world has ever seen”.

This coalition of 360 investors with $US34 trillion in assets under management is trying to persuade the top 100 global greenhouse gas emitters to detail exactly how climate change will affect their business.

This would allow shareholders to pull money away from companies that could be impacted in the future.

CA100+ is also pushing these big companies to align capital spending decisions with efforts to limit global warming to less than 2C (3.6F). And it says they should stop funding lobby groups that push against those goals.

The second international initiative involves around 100 investors with $10 trillion behind them putting pressure on mining companies over tailings dams. This follows the collapse of the Vale iron ore dam in Brazil in January. The disaster flattened the mine’s canteen and administrative area under a deluge of mud and killed almost 300 people.

The Investor Mining & Tailings Safety Initiative, led by Church of England Pensions Board and Sweden’s public pension fund want mining companies to give out much more information about their management of tailings storage facilities.