The National Pensions Reserve Fund wants to join an international grouping which would seek to eliminate "unethical investments", the Dáil Public Accounts Committee heard yesterday.
There is up to €15 billion in the fund, which will be used to meet some of the cost of public sector and State pensions in the years ahead. Committee members yesterday criticised its investment in areas such as the tobacco and armaments sectors.
Dr Michael Somers, chief executive of the National Treasury Management Agency, which manages the fund, said a number of countries and pension funds faced the dilemma of choosing between ethical areas of investment and mandates to maximise returns.
Dr Somers said he had "no grá" for the tobacco or armaments industries but the question had to be asked where do you stop in relation to ethical investments.
"Do you buy bonds of countries that are about to go to war?" he asked. He said he would not like to be on the receiving end of some of the asset-stripping groups in the private equity area. He added that the pension fund was involved with a US private equity operation which had recently bought Hertz.
He said the private equity fund would move to slim down the company and make a return of around 20 per cent.
Chairman of the NPRF Commission Paul Carty said it would be drawing up policy guidelines on ethical investments.
He said the fund was mandated to maximise its returns and that the returns from investment in the tobacco industry were 7 per cent higher than the average.
Mr Carty said the options were to screen each particular investment or to use voting proxies with other groups of a similar mind.
Meanwhile, Dr Somers said the Government's bill for buying "carbon credits" to compensate for Ireland exceeding its greenhouse gas limits under the Kyoto Agreement could cost up to €550 million over five years.
John Dennehy (Fianna Fáil) said pensioners would be prepared to forgo contributions to the pension fund from the tobacco and armaments industries.
