Summary
Pro-Palestinian activists successfully challenged the investment policies of the Guardians of New Zealand Superannuation, for failing to provide adequate standards and procedures to avoid prejudicing New Zealand’s international reputation.
Background
The Guardians of New Zealand Superannuation (“Guardians”) is a Crown entity that manages a sovereign wealth fund of approximately $86billion. The Guardians were established to help meet the future costs of superannuation. Under the New Zealand Superannuation and Retirement Income Act 2001, the Guardians are required to invest the fund on a prudent, commercial basis while “avoiding prejudice to New Zealand’s reputation as a responsible member of the world community”. The Act requires them to establish and adhere to specific investment policies, standards, and procedures covering ethical investment.
The applicants, including two Palestinian New Zealanders and the co-chair of the Palestinian Solidarity Network Aotearoa, had lobbied the Guardians since 2020 to divest from four specific companies (Airbnb, Booking.com, Expedia, and Motorola) due to their alleged complicity in human rights abuses in the occupied Palestinian territories. After the Guardians declined to exclude the companies, stating they did not meet the "exclusion threshold" under their Sustainable Investment Framework, the applicants initiated judicial review proceedings. They argued the Guardians' policy documents did not contain effective standards or procedures for avoiding prejudice to New Zealand’s reputation and were therefore unlawful.
The Case
The applicants sought two orders from the Court – that the investment policies, standards and procedures did not comply with the Act, and that four specific investments were unlawful because of this.
As a preliminary matter, the High Court rejected the Guardians' arguments that their policy decisions were non-justiciable or subject only to a "light touch" standard of review. The Court affirmed that it is the judiciary's role to determine whether public bodies have complied with their specific statutory duties.
The core legal issue was whether the Guardians' current policy documents complied with the Act. The High Court examined the evolution of the Guardians' policies, noting that earlier iterations (such as the 2020 policy) had referenced specific, universally recognised benchmarks like the UN Global Compact to measure human rights compliance. However, in 2022, the Guardians amended their policies to "reduce content," removing these specific benchmarks. They replaced them with broad undefined thresholds, such as a "serious risk of material breach of standards of good corporate practice," and a vague list of 13 bullet points for exercising judgment, without clarifying exactly who makes exclusion decisions or how.
The Court emphasised that while the Act grants the Guardians flexibility to choose their standards it does not mandate the use of specific frameworks, like the UN Guiding Principles, though it noted they are highly relevant) The statutory requirement to "establish, and adhere to" policies means those documents must contain ascertainable benchmarks and defined processes. Because the current policies lacked specific human rights standards and procedural clarity, they could not be meaningfully applied consistently or subjected to the external review and certification required by the Act. Consequently, the Court found the policies were so general that they failed to meet minimum statutory requirements, rendering them unreasonable and unlawful.
Result
The Court found in favour of the applicants and granted the application for judicial review. It issued a formal declaration that Part Nine of the statement of investment policies, and the sustainable investment framework, did not comply with the New Zealand Superannuation and Retirement Income Act 2001 and are unlawful.
The Court declined to declare the specific investments unlawful, though the Guardians are required to reformulate their policies to comply with the Act, after which they must reassess the challenged investments.
This is a narrow judgement, applicable to the Guardians and the unique statutory role they have. However, it may have flow on affects to how other funds manage their responsible investment obligations.
For further information on this case or similar matters, please contact Director Brigitte Morten.
