High Court rules NZ Super Fund’s ethical investing framework unlawful after human rights challenge

The High Court has declared parts of New Zealand’s sovereign wealth fund’s ethical investment framework unlawful, finding that the Guardians of New Zealand Superannuation failed to properly apply human rights standards in managing one of the country’s most significant pools of capital.

Justice Simon Mount granted a judicial review application brought by Palestine Solidarity Network Aotearoa, ordering that parts of the fund’s policy documents, standards and procedures, and its sustainable investment framework be set aside as unreasonable and unlawful. The court also ordered the fund to pay the group’s legal costs.

At the heart of the case was approximately $67 million the fund held, at the time of proceedings, across four companies listed on the United Nations Human Rights Council’s database of businesses operating in illegal Israeli settlements — Airbnb, Booking.com, Expedia, and Motorola Solutions. The challenge argued that holding these investments was incompatible with the fund’s statutory obligation to avoid prejudice to New Zealand’s reputation as a responsible member of the world community.

The $86 billion fund, established in 2001 to help meet the future cost of New Zealand Superannuation payments, is governed by legislation that explicitly requires its managers to act in a manner consistent with New Zealand’s position in the international community and with accepted principles of responsible investment.

The court’s ruling focused on a policy change the Guardians made in 2022, when it removed references to established human rights standards, including the United Nations Global Compact, from its policy framework. That removal was identified as the central legal problem. In 2021, the fund had actually excluded five Israeli banks from its portfolio on human rights grounds, a decision that acknowledged the relevance of such standards to investment decisions. But the subsequent stripping of those references from formal policy was found to be inconsistent with the fund’s founding obligations.

Jo Townsend, chief executive of the Guardians of New Zealand Superannuation, said the organisation would take time to work through the implications of the decision. “We will thoroughly evaluate today’s decision and determine how best to respond to it,” she said.

John Minto, co-chair of Palestine Solidarity Network Aotearoa, was blunter in his assessment. “This is beyond outrageous,” Minto said. “Our largest sovereign wealth fund has no specific references to human rights standards.”

The ruling raises significant questions about how the fund will now need to revise its approach to ethical investing. Reinserting recognised international human rights frameworks into its policy documents would appear to be a minimum requirement, and doing so would likely trigger a fresh review of its current holdings against those standards.

The fund’s approach to responsible investment has evolved considerably since its establishment. For most of its history it used a relatively light-touch model, applying exclusions only to a small number of categories such as tobacco manufacturers, cluster munitions producers, and certain weapons companies. It has grown increasingly sophisticated in its environmental, social, and governance analysis over time, but the 2022 policy change effectively left it without explicit anchoring to recognised global human rights norms — an omission the court has now confirmed was legally problematic.

Beyond the immediate question of which companies the fund holds, the ruling has broader implications for how New Zealand’s public investment vehicles manage the tension between investment returns and their obligations under domestic legislation and international norms. The Super Fund is not alone in grappling with these questions. KiwiSaver schemes, ACC’s investment portfolio, and other publicly managed funds all face versions of the same challenge — how to reflect New Zealand’s values as a responsible international actor while also meeting their primary purpose of generating returns.

For many New Zealanders, the Super Fund represents something more than a retirement savings vehicle. It is, in theory, a statement of how the country chooses to deploy its collective savings — and the court’s ruling reinforces that this statement carries legal weight, not just moral aspiration.

The Guardians have not indicated whether they will appeal the ruling or accept it and revise their frameworks accordingly. Either path carries consequences. An appeal prolongs legal uncertainty and keeps the fund’s current holdings in the spotlight. Accepting the ruling and rebuilding the policy framework around explicit human rights standards would represent a significant shift in how the fund describes and implements its responsibilities.

With $86 billion under management — a figure that continues to grow as contributions flow in and returns compound — the stakes are considerable. What the fund holds, and the standards it applies in deciding what to hold, matters in ways that go well beyond the legal fine print.

Original reporting on the decision can be found at RNZ.

Do you think the NZ Super Fund should apply stricter human rights standards to its investment decisions? We would like to hear your view in the comments below.