Community Trusts - making a difference
The voluntary sector is a vital part of New Zealand's social fabric. More than a million Kiwis in some form or another are involved in voluntary work.
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Speech Notes for a meeting with chairs and chief executives of the combined community trusts, Skyline Restaurant, 1 Upland Road, Kelburn, Wellington
Thank you for the invitation to be here.
I want to start out by acknowledging the work you do.
In around five hundred homes in Auckland this winter, kids will snuggle into their beds, warm and dry and healthy. They live in homes that might have been cold and damp, because their homes don't have insulation. When kids get cold they get sick. But the ASB community trust has put more than $1.4 million into the Snug Homes project to insulate homes - especially for families who are low income and have young children with a breathing problem.
The story is an example of the difference community trusts make all over New Zealand.
It's a community contribution matched in Timaru, where the Mid and South Canterbury Trust bought the old Pyne Gould Guinness Building for thirty-two voluntary sector groups to share its facilities.
It's matched in Otago where the Community Trust of Otago gave $100,000 to the Terrace School in Alexandra for a facility the students and the community will use.
The TSB Trust donated $100,000 to the Aotearoa Marae Committee so a meeting house could be completed and a new dining room built.
The voluntary sector is a vital part of New Zealand's social fabric. More than a million Kiwis in some form or another are involved in voluntary work. Everything they do in sports clubs, community groups and local halls and clubrooms helps to strengthen the community.
It takes some capital to get things done and, with a capital base of more than $2.4 billion, the Community Trusts are a vital source of capital contributions to our community and voluntary sector.
With that money comes a heavy burden of responsibility. Investments need to be managed with diligence, care and thoughtfulness.
When it comes to investment, one topic that is receiving increasing attention is the issue of 'responsible investment'. That is, investment that goes beyond simply achieving a return on the invested dollar and looks more deeply into the nature of the investment. This is a particularly relevant point for a community trust because of its mission to make a contribution to the community.
For example, it would not make much sense for a trust to donate to a community project cleaning up pollution if its capital was also being invested in the polluter. Equally, trustees have an obligation to earn a fair return. They can't be expected to second-guess the business decisions of firms they invest in; nor is irresponsible investment always clear-cut.
There is rising public awareness around responsible investment. The issue has been raised in reference to the NZ Superannuation Fund, for example. The fund has taken positive steps in this regard being one of the first funds in the world to last year sign up to the United Nations Principles on Responsible Investment. It has also recently appointed a Responsible Investment manager.
However, the government is careful not to intervene in the investment decisions of that Fund and we are not going to lecture Community Trusts either.
Trustees are put in place in part because we expect them to have the judgement to make the right choices.
I would observe there are new practices developing that include increased opportunity for investors to work together and engage with companies to change behaviour, rather than just divesting shares.
And nor is responsible investment necessarily a bad investment decision. There are several reasons.
· For example, a business that is wasting resources in the production process might actually save money by cleaning up its environmental record.
· Second, consumers are increasingly demanding ethical behaviour from the businesses they deal with. So socially and environmentally responsible business practice can help to attract customers and help a business to command a premium for its products.
· Third, because there are more investors available to invest in responsible enterprises, it's possible for the cost of capital to be lower for responsible firms.
In fact a 2005 article in Slate magazine had an entertaining perspective on this issue - it reported that both virtue and vice funds outperform the average investment fund. (Vice funds are those that invest in human frailties, such as gambling, sex, alcohol, tobacco and war. Presumably few companies do all these at the same time.)
To put the article's findings in the words of the headline, both God and Satan are both winning on Wall Street. This is, of course, only one piece of evidence, and there was a discovery that both the vice and virtue funds in the survey held one stock in common!
What is important for us to recognise is that the comparison proved it is possible for so-called virtue funds to perform better than the industry average.
The example is purely entertainment, but there is a growing consensus that, done right, responsible investment has the potential to improve returns rather than constrain them.
There is no one-size-fits-all answer to responsible investment. The topic is one boards need to weigh up in their own organisations.
There is a demand for skills at board level to work through these issues.
I am currently in the process of making appointments to the Trusts to address the vacancies that arise in May. I am keen to ensure that Trustees are appointed with good financial and investment expertise.
Earlier this year I launched the new Charities Register. I am sure your trusts will want to apply to register as charities and I encourage you to do that before the end of July next year. As a registered charity you can expect to be eligible for tax-exempt status.
As well as registering charities, the Charities Commission will monitor charitable organisations. It will provide education and support on good governance and management. Access to education and support is one of the benefits of being registered.
It will also be a useful tool for you when you allocate funding. When you consider the suitability of funding applicants, you will have certainty that registered charities have met certain standards.
Charities can be sophisticated multi-national organisations backed by brands, capital and management resources...or tiny community groups with little resource other than energy and good intentions.
But if their primary activities are about the benefit to society, they will be charitable and they will be registered.
For some kinds of contributions community trusts make, this added assurance will help to reduce your compliance costs and make your job easier.
The new Charities Commission and the launch of the Charities Register mark the beginning of a new era for charities.
Community Trusts make an important contribution to the community sector.
I am pleased to see you developing your partnership with others in the sector. Your annual conference here in Wellington with Philanthropy New Zealand is the type of partnership and collaboration that is required to create a strong, vibrant and advancing community sector.
Let me close by again acknowledging the value to the community of your efforts.
I wish you all the best for the remainder of your meeting, and I look forward to hearing more of your success stories.
---------------------------------
Speech Notes for a meeting with chairs and chief executives of the combined community trusts, Skyline Restaurant, 1 Upland Road, Kelburn, Wellington
Thank you for the invitation to be here.
I want to start out by acknowledging the work you do.
In around five hundred homes in Auckland this winter, kids will snuggle into their beds, warm and dry and healthy. They live in homes that might have been cold and damp, because their homes don't have insulation. When kids get cold they get sick. But the ASB community trust has put more than $1.4 million into the Snug Homes project to insulate homes - especially for families who are low income and have young children with a breathing problem.
The story is an example of the difference community trusts make all over New Zealand.
It's a community contribution matched in Timaru, where the Mid and South Canterbury Trust bought the old Pyne Gould Guinness Building for thirty-two voluntary sector groups to share its facilities.
It's matched in Otago where the Community Trust of Otago gave $100,000 to the Terrace School in Alexandra for a facility the students and the community will use.
The TSB Trust donated $100,000 to the Aotearoa Marae Committee so a meeting house could be completed and a new dining room built.
The voluntary sector is a vital part of New Zealand's social fabric. More than a million Kiwis in some form or another are involved in voluntary work. Everything they do in sports clubs, community groups and local halls and clubrooms helps to strengthen the community.
It takes some capital to get things done and, with a capital base of more than $2.4 billion, the Community Trusts are a vital source of capital contributions to our community and voluntary sector.
With that money comes a heavy burden of responsibility. Investments need to be managed with diligence, care and thoughtfulness.
When it comes to investment, one topic that is receiving increasing attention is the issue of 'responsible investment'. That is, investment that goes beyond simply achieving a return on the invested dollar and looks more deeply into the nature of the investment. This is a particularly relevant point for a community trust because of its mission to make a contribution to the community.
For example, it would not make much sense for a trust to donate to a community project cleaning up pollution if its capital was also being invested in the polluter. Equally, trustees have an obligation to earn a fair return. They can't be expected to second-guess the business decisions of firms they invest in; nor is irresponsible investment always clear-cut.
There is rising public awareness around responsible investment. The issue has been raised in reference to the NZ Superannuation Fund, for example. The fund has taken positive steps in this regard being one of the first funds in the world to last year sign up to the United Nations Principles on Responsible Investment. It has also recently appointed a Responsible Investment manager.
However, the government is careful not to intervene in the investment decisions of that Fund and we are not going to lecture Community Trusts either.
Trustees are put in place in part because we expect them to have the judgement to make the right choices.
I would observe there are new practices developing that include increased opportunity for investors to work together and engage with companies to change behaviour, rather than just divesting shares.
And nor is responsible investment necessarily a bad investment decision. There are several reasons.
· For example, a business that is wasting resources in the production process might actually save money by cleaning up its environmental record.
· Second, consumers are increasingly demanding ethical behaviour from the businesses they deal with. So socially and environmentally responsible business practice can help to attract customers and help a business to command a premium for its products.
· Third, because there are more investors available to invest in responsible enterprises, it's possible for the cost of capital to be lower for responsible firms.
In fact a 2005 article in Slate magazine had an entertaining perspective on this issue - it reported that both virtue and vice funds outperform the average investment fund. (Vice funds are those that invest in human frailties, such as gambling, sex, alcohol, tobacco and war. Presumably few companies do all these at the same time.)
To put the article's findings in the words of the headline, both God and Satan are both winning on Wall Street. This is, of course, only one piece of evidence, and there was a discovery that both the vice and virtue funds in the survey held one stock in common!
What is important for us to recognise is that the comparison proved it is possible for so-called virtue funds to perform better than the industry average.
The example is purely entertainment, but there is a growing consensus that, done right, responsible investment has the potential to improve returns rather than constrain them.
There is no one-size-fits-all answer to responsible investment. The topic is one boards need to weigh up in their own organisations.
There is a demand for skills at board level to work through these issues.
I am currently in the process of making appointments to the Trusts to address the vacancies that arise in May. I am keen to ensure that Trustees are appointed with good financial and investment expertise.
Earlier this year I launched the new Charities Register. I am sure your trusts will want to apply to register as charities and I encourage you to do that before the end of July next year. As a registered charity you can expect to be eligible for tax-exempt status.
As well as registering charities, the Charities Commission will monitor charitable organisations. It will provide education and support on good governance and management. Access to education and support is one of the benefits of being registered.
It will also be a useful tool for you when you allocate funding. When you consider the suitability of funding applicants, you will have certainty that registered charities have met certain standards.
Charities can be sophisticated multi-national organisations backed by brands, capital and management resources...or tiny community groups with little resource other than energy and good intentions.
But if their primary activities are about the benefit to society, they will be charitable and they will be registered.
For some kinds of contributions community trusts make, this added assurance will help to reduce your compliance costs and make your job easier.
The new Charities Commission and the launch of the Charities Register mark the beginning of a new era for charities.
Community Trusts make an important contribution to the community sector.
I am pleased to see you developing your partnership with others in the sector. Your annual conference here in Wellington with Philanthropy New Zealand is the type of partnership and collaboration that is required to create a strong, vibrant and advancing community sector.
Let me close by again acknowledging the value to the community of your efforts.
I wish you all the best for the remainder of your meeting, and I look forward to hearing more of your success stories.