Ruling finds failure to meet statutory requirements on ethical investment
The High Court has declared the Guardians of New Zealand Superannuation's sustainable investment policies unlawful for failing to meet statutory requirements on ethical investment.
In Nazzal v Guardians of New Zealand Superannuation [2026] NZHC 681, delivered on 13 April 2026, Justice Mount granted judicial review against the Crown entity that manages the country's sovereign wealth fund of approximately $86 billion in assets.
The applicants, Maher Nazzal, Rawaa Elhanafy, and John Bernard Minto, challenged the Guardians' policy framework after years of correspondence about the fund's holdings in four companies: Airbnb Inc (approximate value $18.26 million), Booking Holdings Inc (approximate value $48.556 million), Expedia Group Inc (approximate value $467,000) and Motorola Solutions Inc (approximate value $123.330 million).
The New Zealand Superannuation and Retirement Income Act 2001 requires the Guardians to invest the fund on a prudent, commercial basis while managing and administering it in a manner consistent with avoiding prejudice to New Zealand's reputation as a responsible member of the world community. Section 61(d) requires the policy documents to cover ethical investment, including policies, standards, or procedures for avoiding such prejudice.
Justice Mount focused on two documents: part nine of the statement of investment policies, standards, and procedures, and the sustainable investment framework. He found that a 2022 decision by the Guardians to "reduce content", and subsequent amendments, had progressively stripped substance from these documents.
The judge noted that the 2020 version of the policy referred directly to the UN Global Compact and the Principles for Responsible Investment as benchmark standards. The Guardians applied these in early 2021 when they excluded five Israeli banks from the portfolio, concluding the banks were materially in breach of Principles 1 and 2 of the UN Global Compact.
The current documents removed the reference to the UN Global Compact and no longer linked exclusion to specific human rights standards. Justice Mount found the operative phrase, "serious risk of material breach of standards of good corporate practice," was undefined and not connected to identifiable benchmarks. A list of 13 bullet points guiding exclusion decisions amounted to "a series of generic or broad categories notable for their lack of discernible boundaries."
Evidence revealed inconsistent thresholds across the Guardians' correspondence and affidavits, including references to "proximity or importance," "severe breach of human rights standards," "actual construction and development," "significantly breach," "materiality and directness," and MSCI's "severe or very severe controversies" classifications. None of these tests appeared in the policy documents.
Justice Mount held that policy documents must identify standards and procedures with sufficient clarity to enable adherence, certification, and external review. They must specify who makes decisions, how they make them, and what standards they apply.
The judge also found a disconnect on procedure. The 2020 policy contained flowcharts showing decision-making steps. The current documents omitted these and described processes in general terms, leaving unclear who held decision-making authority. Counsel advised that the Co-Chief Investment Officers and the Head of Sustainable Investment held sub-delegated authority to exclude an individual issuer on the recommendation of the investment committee, but this was not documented in the policy documents.
Although the respondent's own witness, Simon O'Connor, a Director of Bank Australia, described the need in this context for "clearly defined criteria," "clear rules and thresholds," and decisions that are "transparently disclosed and consistently applied," the current framework fell short. The judge added that there appeared to be consensus in the evidence that the UN Guiding Principles on Business and Human Rights are "broadly supported and relevant international standards," giving the Guardians good reason to reassess whether there is a role for them in the policy documents.
Justice Mount declared that part nine of the statement of investment policies, standards, and procedures and the sustainable investment framework do not comply with sections 58(2)(c) and 61(d) of the Act and are unreasonable and unlawful. He declined to issue an order in the nature of mandamus, finding it followed as a matter of law that the respondent has a duty to reformulate the policy documents consistently with the Act. The applicants were held entitled to costs, with quantum to be determined on the papers if the parties cannot agree.
