Wise Response on Pathfinder’s Sustainability Report 2021

13 November 2021

Anya Satyanand

Independent Director of Pathfinder Asset Management

Chair of Pathfinder’s Ethics Committee

Dear Anya,

Wise Response on Pathfinder’s Sustainability Report 2021

Thank you for drawing our attention to Pathfinder’s Sustainability Report 2021. One of the points we made in our earlier review 1 was the lack of reporting about your activity, and this report is a step forward.

We also want to acknowledge that the Sustainability Report picks up on our reference to the BankTrack report about the 60 banks that collectively invest in fossil fuels to the sum of around US$3.8 trillion dollars. This is another move to becoming more transparent. Your report states (page 10) that there is an inconsistency between avoiding investment in fossil fuel companies, but at the same time investing in the large global banks that do lend to those companies. You report that you have investments in Morgan Stanley and Goldman Sachs. It is good that you have a goal to remove all of the top 20 financiers from all of your portfolios by the end of the current financial year. Unfortunately, the Sustainability Report omits that Pathfinder also invests in National Australian Bank (NAB). No mention is made of the investment in the Macquarie Group which has also fossil fuel investments.

We wondered whether this was an oversight that should not detract from the rest of your report, but unfortunately there are some other major concerns about the report which indicate a more systemic problem. These include your restatement of your Ethical Investment Policy which is confusing, the continued use of the invalid frameworks of the UN Principles of Responsible Investment (UNPRI) and B Corp which is deceptive, and the need for a much fuller account of your engagement.

Pathfinder has chosen the notion of harm as a high-level principle. How has Pathfinder used the notion of harm to select, assess, divest and engage with companies in its portfolios? We have questions about the Sustainability Report.2 Does it provide assurance that Pathfinder only invests in companies that do not harm people and the planet, or is it engaged with companies to move them to improve their behaviour? It is not easy to answer these points because of the disjointed reporting and the confused choice and use of ethical (and unethical) notions.

On the evidence in the report, it appears that Pathfinder is making significant efforts carbon footprints and energy efficiency in particular. The case studies such as support for the Community of Refuge Trust, or the four private unlisted companies, are impressive. The 5 companies listed under the title Key Holdings (page 31) are on face value worthy of investment on ethical grounds. However, because it is not possible to know how Pathfinder is performing overall regarding its commitment to avoid harm, these efforts do not tell the full story.

We are critical of these matters because until they are addressed, Pathfinder’s claim to be an ethical investment fund provider is not justified. We therefore cannot withdraw our complaints to the Financial Markets Authority and the Commerce Commission. We look forward to the time when the basis of these complaints is no longer present.

1. Ethical investment Policy – Principles and “Shaping”

The Report refers to Pathfinder’s Ethical Investment Policy, where it states there are two high level principles: first, avoid harm to our planet and people; second, go further than just avoid harm, and strive to do the ‘right thing’. These high-level principles are shaped by

a) UN Sustainable Development Goals;

b) Environmental, Social and Corporate Governance (ESG) Incorporation and the UNPRI Framework;

c) Climate change awareness:

d) Aware, Fair, Care;

e) Active ownership.

1.1 Avoiding Harm, Doing the Right Thing

Is the second principle a recognition that the first principle of harm is inadequate? If so, in what way is it inadequate? What does the ‘right thing’ mean?

Following the checklist included in the article on the Simplicity Fund would help to demonstrate that Pathfinder takes the notion of harm seriously. 3

1.2 ‘Shaping’

What is meant by ‘shaping’? Does it mean that the principles and frameworks in a) – e) above, such as the SDGs, ESG and the UNPRI will be used to fill in any shortcomings of the notion of harm? If that it is the case, what shortcomings are there with the use of the concept of harm? What in particular do these goals and frameworks offer that can fill in where there are inadequacies? Or are these goals and frameworks duplicate sets? Or can they expand and enrich the notion of harm? (See the example of the Simplicity article where the principles of fairness, integrity and transparency can be derived and applied from the notion of harm.) If it is the latter, then how can the SDGs, ESG and the UNPRI be derived from the notion of harm?

1.3 Sustainable Development Goals (SDGs)

In the articlePathfinder Ethical Funds: Are they Ethical? Lessons to be Learned 4, it is stated

The use of Social Development Goals is not the most appropriate framework.  Take the First Goal: End poverty in all forms everywhere. This is not an ethical statement.  It is a statement about a desired future state of affairs.  Why should we aim to end poverty?  Because it is not fair.  That is the moral principle that is important.  Also, it makes it more relevant for companies, because ending poverty is an issue for governments primarily, whereas the principle of fairness is directly applicable to companies.  The Second Goal, Zero Hunger, has a similar moral principle underlying it, which leads to duplication of the value.

The majority of companies do not state that their primary goal is to end poverty. They may contribute to helping by employing staff and paying them a living wage. But then a large number of companies could say that they do this, including fossil fuel companies, and it does not seem a material factor in assessing whether they behave ethically. Or they may make donations to an agency with the specific goal of working to reduce poverty. But we would not state a company is unethical if it did not make such donations. In the Table in the Sustainability Report showing the number of companies in Pathfinder’s funds that declare a positive company contribution to the SDG’s (page 27) only 3.5% report making a contribution to the goal of no poverty. It is difficult to know what this means.

Do the SDGs adequately cover the moral domain? Gough in his book Heat, Greed and Human Need 5 states: The SDGs omit vital components of human wellbeing, like physical security, social affiliation and critical autonomy. He also states: several of the SDGs do not find a parallel in need theory. For example, SD8: “promote inclusive and sustainable economic growth, employment and decent work for all” lumps together important need-related goals – participation in work and acceptable conditions in work – with economic growth, a questionable means to achieving these goals. Moreover, economic growth has been demonstrated to do the opposite. It has caused substantial increases in inequality, poor working conditions and serious impacts on human health and the environment 6.

The SDGs were not designed as an ethical framework to assess and guide the behaviour of organisations. They are statements about a desired future state of affairs primarily for governments to pursue. Trying to adapt them makes them less than useful, unless specific parts can be used to fill in gaps within a key concept.

1.4 ESG and UNPRI

The limitations of these frameworks have been addressed elsewhere: Generate and The Moral Bankruptcy of ESG. 7

1.5 Aware, Fair, Care.

It is not clear how being aware enables one to assess the moral worthiness of an investment? Aware of what? Fairness is usually applied to human-human relations, and perhaps some aspects of human-earth relations. We can use the term to evaluate human actions towards animals. But we would not normally say that destroying the Earth’s ecological systems is unfair.

Care is a notion that can apply to both human-human and human-Earth relations. As such it is potentially an alternative for the notion of harm. It is not clear if including care and fairness as concepts that “shape” the high-level notion of harm, is a duplication, or if these concepts add something to improve the notion of harm?

2. UNPRI and B Corp


  1. that a laboratory is charged with the assessment of the adequacy of sunscreen lotion Product A produced by Company A;
  2. the assessment showed that Product A was not adequate, but the laboratory reported that it was;
  3. the public learnt about the laboratory’s actions;
  4. Company A continued to use the false laboratory report in its promotion of Product A.

Was the company that produced Product A, yet continued to claim it was safe, deceitful?

B Corp and the UNPRI are not valid measures of an ethical company. 8, 9 In continuing to use these frameworks, we cannot see any ethical difference between Pathfinder and Company A producing Product A?

3. Engagement

A Fund can be considered to be ethical if, in addition to investing in companies that do not harm people and the planet, it engages with them to move them to improve their behaviour, and then reports on the outcome of that engagement. The reports of Pathfinder’s engagement provide no assurance that the companies being invested in are improving their performance in any meaningful way. In other words, Pathfinder’s endorsement of these investments appears to be a ‘greenwash’ rather than a real indication that these investments are actually ethical and sustainable, or are making real, measurable progress towards becoming ethical and sustainable.

4. The Overall Picture

It is not clear if Pathfinder has used the notion of harm to select, assess, divest and engage with companies in its portfolios. The report does not provide any assurance that Pathfinder only invests in companies that do not harm people and the planet, or is engaged with them to move them to improve their behaviour? The disjointed reporting and the confused choice and use of ethical (and unethical) notions is not helpful in this regard.

While elements of the changes made by Pathfinder are to be welcomed, overall Pathfinder’s claim to be an ethical investment fund provider is not justified.

We are happy to discuss the above further to see if there is a way forward with the issues we have raised at a mutually convenient time.

Yours sincerely

Professor Emeritus Liz Slooten, Department of Zoology, Otago University

Chair of Wise Response, on behalf of Wise Response Society

The Wise Response Society is a broad coalition of scientists, engineers, lawyers, artists, sportspeople etc. who are urging New Zealand to face up to the question “As demand for growth exceeds earth’s physical limits, causing unprecedented risks, what knowledge and changes do we need to secure New Zealand’s future wellbeing?” Our website – www.wiseresponse.org.nz – contains more information, including references to the case studies and Wise Response’s other initiatives. Our Patrons are Sir Alan Mark and Sir Geoffrey Palmer.

1 http://wiseresponse.org.nz/wp-content/uploads/2021/08/Pathfinder-Ethical-Funds-rev-3a.pdf

2 Why is this called a Sustainability Report? Would it not be more appropriate to call it Report on the Application of our Values 2021?

3 Retrieved from http://wiseresponse.org.nz/?s=simplicity

4 Retrieved from http://wiseresponse.org.nz/2021/05/21/pathfinder-ethical-funds-are-they-ethical-lessons-to-be-learned-by-dr-robert-howell/

5 Ian Gough. Heat, Greed and Human Need. 2017. Edward Elgar Publishing

6 See for example, Chomsky and Waterstone, 2021 “Consequences of Capitalism”.

7 Retrieved from http://wiseresponse.org.nz/2021/09/22/generate-and-the-moral-bankruptcy-of-esg/

8 Retrieved from http://wiseresponse.org.nz/2021/09/22/generate-and-the-moral-bankruptcy-of-esg/

9 B Corporation, Transparency and Validity. Retrieved from http://wiseresponse.org.nz/2021/10/07/b-corporation-transparency-and-validity/