Adjourned debate on second reading.
The Hon. H.M. GIROLAMO (15:56): I indicate that I will be the lead speaker in the upper house for the Liberal Party and from the outset indicate our support for this bill. I also indicate that I have some questions at the committee stage, but overall we will be supporting this bill in its entirety.
The invasion into and subsequent war in Ukraine, the first since the guns fell silent at the end of World War II, is alarming. According to the UN, this invasion has led to more than 10 million people being forced from their homeland. This is a catastrophe of epic proportions, both from an economic impact and, more concerningly, the humanitarian impact. The war must stop and Russia must cease their encroachment on the sovereign territory of Ukraine.
The Australian federal government has continued to provide support for Ukraine as committed to by the previous government in a number of ways, including removing tariffs on imports to Australia from Ukraine. In 2021, Ukrainian imports to Australia were close to $120 million. This measure will see tariffs of up to 5 per cent reduced to zero for a period of 12 months on a range of goods that are produced or manufactured in Ukraine, although excise-equivalent duties will still apply on fuel, alcohol and tobacco products. Economically, these changes will assist Ukraine and at the same time further isolate Russia economically as the coalition against Russian aggression further excels.
Materially, Australia has also assisted Ukraine with almost $400 million worth of defence material, including 60 Bushmaster Protected Mobility Vehicles, six lightweight howitzers with ammunition, 28 armoured vehicles, and South Australia has also been providing medical items to be used in their hospitals across Ukraine, including masks, wound dressings, emergency medical kits, and other medical items for their field hospitals—all medical necessities during this time of war.
At the same time, Australia is restricting or frustrating Russia as the aggressors. Australia has, for example, imposed targeted financial sanctions and travel bans on 843 individuals and 62 entities to inflict heavy costs on those responsible. Australia has banned the import of Russian oil, petroleum, coal and gas, banned the export of alumina and bauxite, and luxury goods to Russia, and introduced an additional tariff of 35 per cent on imports from Russia and Belarus.
Australia has joined partners in announcing we will prohibit the import of Russian gold to reduce Russia’s ability to fund its war, along with committing $1 million and two staff to support the International Criminal Court investigation into reported Russian war crimes. These sanctions will restrict and hurt Russia economically and further isolate this destructive regime. It will also put pressure on Vladimir Putin’s inner circle, on whom he relies to stay in power and they rely on him for their high status. It will also begin the slow process of pursuing Russia and President Putin through the international courts.
The recent United Nations resolution is telling of what the world thinks of Russia’s actions. The United Nations reaffirmed the importance of the Charter of the United Nations and the promotion of the rule of law among nations. It also condemned the Russian so-called special military operation in Ukraine, reaffirmed that no territorial acquisition resulting from the threat or use of force shall be recognised as legal and urged the peaceful resolution of the conflict through political dialogue, mediation and other peaceful means.
This resolution, when put to the general council of the United Nations for a vote, had the highest number of votes against Russia since the invasion began: 143 countries supported the resolution, including Australia. The chorus of condemnation is getting louder and it is not dissipating anytime soon. The United States President, Joe Biden, was understated when he said it was a clear message to Moscow. I am proud of what Australia is contributing on the world scale to support the defence of Ukraine and to stop the Russian invasion. Many others in the parliament have spoken of their lived experiences in war zones, and it is not history that bears repeating. I just hope that all this work at the global level is frustrating Russia’s effort at war.
Locally, Funds SA has been proactive from the start in doing what it can. It is built up of superannuation from some 200,000 South Australians, and it is no small nest egg. As of June 2022, there were $39 billion of funds under management. Funds SA has begun to divest itself of Russian assets. The latest update on the Funds SA website indicates that the original exposure of $60 million in Russian investments has been reduced to $9 million, or 0.02 per cent of the investment portfolio.
It further indicates that it is working with its external investment managers regarding Funds SA’s exposure to Russian securities and has been implementing sanctions imposed by the Australian government. I note the strong words of the Treasurer in the other place that it is not the beginning of a slippery slope where the Treasurer of the day, no matter the party, is able to freely decide and dictate what Funds SA is or is not able to invest in. Its independence, aside from this extraordinary narrow circumstance, is assured.
I indicated earlier that the opposition will support this legislation, but our questions will be focused on what processes and mechanisms exist to ensure that the directive and nothing further is adhered to and also what process or mechanism is in place to protect South Australians from wearing a loss in the current market enabled by Funds SA having to realise the potential loss that follows the Treasurer’s directive. With those words, I reiterate the demands of the UN to stop this so-called special military operation in Ukraine by Russia and end the invasion and war, and let Ukraine and Europe again live in peace.
The Hon. R.A. SIMMS (16:03): I rise on behalf of the Greens to speak in support of this bill. I should say from the outset that it is my assumption that this bill covers in its scope the superannuation of members of parliament. I do not consider that to be a conflict of interest, given I am part of a class shared with all members of this parliament, but I did want to put that on the record. It is my assumption that that is the case, but I might ask some questions about that in the committee stage.
The bill that has been brought to us today is in response to the current events in Russia and Ukraine. The Australian Greens have publicly condemned Vladimir Putin’s military aggression in Ukraine, as we condemn all military aggression. Indeed, the Greens believe in peace and nonviolence, and it is a fundamental principle of our political party. It is one of our four pillars. We have called on all countries to remember the human cost of war and to work peacefully through diplomatic channels to de-escalate the situation.
The human cost of Russia’s invasion is significant. Since Russia invaded Ukraine in February, the UN Refugee Agency, the UNHCR, has estimated that 7.5 million refugees have fled Ukraine—7.5 million people. Those innocent people have been forced to flee to seek safety, protection and assistance.
The hostilities have resulted in civilian casualties, damage to homes, widescale disruptions in power and water supplies, and once again we see that the cost of war is being borne by ordinary people, ordinary civilians. While the UNHCR and other agencies have provided shelter, blankets, tarps and even solar lamps to over 2.1 million people, the ongoing nature of this conflict will severely stretch aid efforts, and we welcome the South Australian government’s commitment to supporting the Ukrainian people.
In particular, we note that in April more than 100 Ukrainian refugees arrived in Adelaide, and we welcomed them to our state. The state government has also sent aid in the form of medical equipment, and we certainly support those efforts. I know that many South Australians have donated their time and money to support the people of Ukraine during this crisis.
The Greens affirm the right of the people of Ukraine to sovereignty and territorial integrity, and we condemn this invasion by Russia. We believe that nonviolent actions are always preferable to armed conflict, and we stand in solidarity with the people of Ukraine. Just last week, we saw the horrendous missile attacks by the Russian armed forces, leaving more than 100 people injured. These attacks were undertaken when people were on their way to work and on their way to school. The spokesperson for the UN Secretary-General has stated this week:
The Secretary-General is deeply shocked by today’s large-scale missile attacks by the armed forces of the Russian Federation on cities across Ukraine that reportedly resulted in widespread damage to civilian areas and led to dozens of people being killed and injured.
These types of attacks are shocking, and like all South Australians I have been deeply saddened and distressed by the footage I have seen on the news each night. We must do all that we can to find peaceful solutions to this crisis and to provide support to people who are in trouble.
This bill that has been introduced by the government is designed to create a mechanism for Funds SA to divest from Russian assets. It is my understanding that this mechanism is not required; however, it is an important principle being established here. Funds SA has, I understand, already divested Russian assets from $32 million worth down to $9 million, and we have been advised that the remaining $9 million worth of assets are difficult to divest as the global appetite for Russian investments has diminished at this time.
The purpose of this bill, therefore, is to ensure that the minister can give a direction to Funds SA to divest itself from these Russian connections. The Greens support this measure to withdraw our support for economic support for Russian enterprises. It is an important precedent that is being set here today. Giving the minister the power to direct Funds SA to divest from undesirable investments could prove beneficial in terms of addressing other crises we face, and in particular I note the growing climate crisis.
Numerous organisations locally and worldwide have called for divestment from fossil fuels, and according to Yale Climate Connections, an initiative of the Yale School of the Environment, globally over 1,500 institutions have agreed to divest from fossil fuels to a total of $39 trillion worth of investments: 11 per cent of these divestments came from government. If you look through the global fossil fuel divestment commitments database, there are a wide range of organisations, including local governments, universities, faith-based organisations, healthcare and cultural institutions that have done this here in Australia as well as overseas.
Divestment is a powerful lever: it sends markets a message about our values. We know that money talks, and I think the parliament supporting this bill today sends a very clear message that we do not want to see this South Australian super scheme being connected with the Russian government, the immoral activities of that government and the activities that are illegal in that they defy international law. This is an important principle and one that the Greens are supportive of.
The Hon. T.A. FRANKS (16:09): I rise to echo the words of my colleague the Hon. Robert Simms, who is the Greens portfolio spokesman for this particular matter, but also to emphasise the Greens’ support. What we have seen coming out of Ukraine is absolutely harrowing. Every day we hear of missile and drone strikes. We hear of the deaths. Millions have been driven from their homes. Russia’s actions have fundamentally undermined Ukrainian territorial integrity and Ukrainian sovereignty. The cost of this war, as with all wars, is borne by civilians, and we must stop it. We must act to stop this war continuing.
The situation can only be resolved peacefully through de-escalating tensions and bringing the focus back to diplomacy, which is what this bill does today. The situation does require a global response, and the United Nations Emergency Special Session should be reconvened using the power of resolution 377A(V). An agreement should be made to support a range of nonviolent measures working towards ending this war.
From the outset, the Greens have supported a range of sanctions being imposed on Russia. In 2021, Russia earned $US119 billion from oil and gas revenue, and it is this money that funds Putin’s war machine. We would like to see the Ukrainian debt forgiven and Australia’s refugee intake increased by 20,000 to give a home to Ukrainians fleeing this conflict. We have war in Europe. We have a nuclear nation invading a sovereign state. This is a time to push for peaceful, nonviolent solutions. Disinvestment presents an opportunity to limit Russia’s economic power and its ability to continue its invasion.
This bill, by ensuring that we in South Australia are not unwittingly supporting the Russian invasion through Funds SA, is a small but positive step. We condemn Vladimir Putin’s military aggression in Ukraine. I support this bill as a step to limiting the ability for Russia to continue this war and as a positive, nonviolent step working towards de-escalation.
The Hon. C. BONAROS (16:11): I rise on behalf of SA-Best to speak on the Superannuation Funds Management Corporation of South Australia (Investment in Russian Assets) Amendment Bill 2022. As we have heard, the bill seeks to provide for a ministerial direction to Funds SA in relation to divestment of Russian assets. Overriding a direction, however, is also the requirement of the fund to act, and I quote, ‘prudently and consistently with the Corporation’s responsibilities to the entities for whom it invests and manages funds’.
In some respects, it is a curious bill. The cynic in me might say that it is the government ticking off another election commitment. I have to say for the record we, too, wholeheartedly condemn the invasion of Ukraine by Russia and stand firmly shoulder to shoulder with our Ukrainian brothers and sisters. We echo the same concerns that have been raised by our colleagues in this place and fully endorse those views in relation to that horrid conflict.
I do want to say one thing, which is, regardless of our stance on the Ukraine-Russia conflict—and I think we are all united in terms of that stance, as has been articulated so eloquently by my colleagues in this place today—we know that Funds SA has been actively divesting its Russian assets. The board has a responsibility to its members, so it cannot really be compelled to sell down all remaining Russian investments at a loss. That is the curious part of this bill that I allude to.
In early March, less than two weeks after Russia invaded Ukraine, Funds SA released the following statement:
In response to the Russian/Ukraine crisis, Funds SA has been actively engaged with its external investment managers regarding exposure to Russian securities, and has been implementing sanctions imposed by the Australian Government.
Some divestment has already been achieved, and the original exposure to Russia of $60 million has been reduced to $9 million, or 0.02% of the investment portfolio.
We will continue to seek divestment across the portfolio from our investment managers, but note that trading restrictions in key markets make this difficult at the current time.
Funds SA, a signatory to the UN-supported Principles for Responsible Investment, has already acted in a commercial manner to limit Russian investment and has continued to work in accordance with its responsibilities as a signatory to those principles.
If we pause for a moment and remove the subject matter from the bill and consider it objectively, I think you could be forgiven for questioning whether indeed it is necessary, other than for sending the clear message that the Hon. Tammy Franks just pointed to. I suppose the question could be asked, which I asked at the briefing: why do we not do the same for gambling-related businesses? Why do we not add them to the list of businesses that the minister can give a direction to?
I am sure there are many members in this place who would jump at the chance of adding coal and gas to the list of investments and that is before we start making our way through other dictatorships around the world. That is not a criticism of this issue; it is a practical reality. When I say I am just talking about this objectively, there are a number of issues that we could be highlighting—
The Hon. R.A. Simms interjecting:
The Hon. C. BONAROS: Absolutely—where we could, should, ought to be trying, however you want to explain it, to do precisely the same as we are doing here. I suppose it opens a bit of a Pandora’s box in terms of where we draw the line.
I am going to refer to a statement made by the opposition leader at the time, now Premier, when he said in opposition, ‘We know that this is the right thing to do—it is unconscionable for state government funds and public sector workers’ superannuation to be invested in Russian assets.’ We all agree with that, but Treasurer Stephen Mullighan has moved to temper expectations that the fund will be able to fully divest itself from Russian holdings, highlighting concerns raised to him by Funds SA management.
When I say the cynic in me says that this may have been an election commitment made at the time, well, it was that. It was a good idea until we realised that we cannot actually do what we thought we could do in this bill, because there are limitations on what we can do and there are contractual obligations for the state to maintain its presence or its holdings of units within pooled funds, for instance, that cannot simply be exited from in short order. These are not my words. These are words from the Treasurer himself during the debate, who said that, while Labor wanted to divest from Russia’s assets as quickly as possible, it also wanted to protect the value of the government’s remaining assets to the greatest extent possible.
When we talk about it being unconscionable for us to still have super funds tied up in Russian assets, then I suppose the question that raises for me is: why is it unconscionable unless of course there is a loss to be had? So it is unconscionable, but if it is going to result in a loss of money then it is conscionable. That is the sort of inconsistency that I have raised with the government in terms of our position on this.
I think in principle we all agree that none of us want any of our funds and assets tied up in Russian assets but, as we have now established, that is just not possible. We are sending a clear message with this bill that this is the stance the South Australian parliament wishes to take, but it is not that black and white—that is the point I am trying to make. It is not that black and white because if it is going to result in financial losses then it is just not possible to absolutely divest ourselves of those assets.
I hope I have made that point as articulately as possible, but again I just make the point that whilst all of us support the principle of this bill I suppose the objective question that it raises is: do we do this across the board? Do we do it on every single occasion where there are assets tied up in areas that we do not agree with? Do we look at all the dictators across the world? Do we look at coal and gas? Do we look at gambling? The list is endless, I think, of things that we could all think of and say, ‘How conscionable is it that we have funds tied up in those assets?’
I think all of us would absolutely jump at the chance to pass a similar bill that would have the same effect of this bill, but we also need to note that the reality of what this bill can actually achieve is limited because there are limitations that have been pointed out to us by Funds SA, where it is required to act prudently and consistently in accordance with its responsibilities for those entities for whom it has invested and managed funds. If that means that it is going to result in financial losses, then a ministerial direction is not going to change that. With those words, I conclude my remarks.
The Hon. K.J. MAHER (Minister for Aboriginal Affairs, Attorney-General, Minister for Industrial Relations and Public Sector) (16:21): I thank the honourable members for their contributions. In summing-up, I might just reflect on some of the contributions—I think they were good and valuable contributions. I think all members in this chamber and probably in the other place have been to events during the course of this year to stand in solidarity with members of the South Australian Ukrainian community. This is a horrific and very peculiar event that we are seeing unfold in Ukraine, with Russia’s unilateral, violent and aggressive invasion. It is in these unique and unusual circumstances that we find ourselves debating this bill.
I accept and acknowledge some of the commentary that has been made. There will not always be massive practical impacts of some of the things that we do, but there are other things that other members have alluded to that are important. What this says about who we are and what we stand for is important. It places on the record what we believe, as representatives of the people of South Australia, about the actions that Russia has taken against Ukraine, and that is an important part of this bill.
It was also—and it is not a small thing—a commitment that we made to the South Australian people in the lead-up to the March election and it is something that we will be fulfilling as a commitment that we made to the people at the March election. The opposition has indicated that there will be some questions during the committee stage, and I know that the opposition asked a number of questions during the committee stage of this bill in the lower house.
There are reasonable and good questions that can be asked and answered about the nature of investments at the moment, both in direct and pooled funds, and how the ministerial direction operates. Given that it must be taken prudently and consistently with the corporation’s responsibilities, I think as the Hon. Connie Bonaros has raised, and I can get better advice during the committee stage, but in terms of the directive investments I understand that Funds SA have instructed their funds managers to divest of Russian interests, and that could include selling it at what would make a loss.
If selling Russian stock makes a loss that is not a barrier to that being sold. I think what is a barrier, from my understanding—and if I may make further comments during the committee stage—is the actual liquidity in the market for Russian equities. In a lot of areas there is not a buyer, so people from countries like Australia, like our Funds SA, who hold Russian equities, for quite a number of them that have been ridden down to a value of zero there is no liquidity in the market; that is, there is no-one to buy it, even for a willing seller even at a zero value. But these are issues we are happy to explore further in the committee stage and I thank honourable members for their contributions.
Bill read a second time.
The Hon. H.M. GIROLAMO: My question is about what other states have been doing regarding divestment of Russian assets and what considerations were made for different ways of managing this bill.
The Hon. K.J. MAHER: I thank the honourable member for her question. My advice is—and this could be double-checked—that different states have different legislative regimes in relation to similar funds management for a superannuation fund like Funds SA. I am advised that we think the equivalent body in New South Wales is subject to a power of ministerial direction that we think was exercised in relation to this.
We can double-check that but our understanding is that, at least in the case of New South Wales, the sort of power that we are seeking to give the South Australian Treasurer in this bill already exists, and that was exercised in relation to New South Wales. I am quite certain I have heard statements from most state premiers in relation to this, expressing similar sentiments if not being able to exercise similar powers as this.
The Hon. C. BONAROS: I have a question in relation to the comments that the Attorney made in relation to the losses. I will refer back to the notes that I had from my briefing and also the points that he just made. Was he suggesting that we are able to wear losses as a result of those divestments, if we are trying to bring down that 0.02 per cent?
The Hon. K.J. MAHER: I thank the honourable member for her question. My advice is that there was about—in terms of direct investments in Russian equities from Funds SA—$12 million in direct investments. They currently have been written down to a value of zero but there is an instruction to the manager that when liquidity returns to divest of those. So it is quite possible, but at the moment there is a book loss of every single cent on that $12 million of investment, but there is a standing instruction to the funds manager to divest of those investments if and when liquidity returns and subject to any sanctions that allow the divestment of those equities.
The Hon. H.M. GIROLAMO: What risk mitigation strategies were put in place to reduce or alleviate any of the losses coming out?
The Hon. K.J. MAHER: Any—what is that?
The Hon. H.M. GIROLAMO: Sorry, I will talk a bit louder. What risk mitigation strategies have been put in place to counteract the losses that have been incurred from divesting or writing down the assets relating to Russian investments?
The Hon. K.J. MAHER: My advice is that in relation to the direct investments Funds SA has in Russian equities they have instituted their general valuation practice that where there is no liquidity to write down to zero. I am not sure if that answers the question. Maybe if there is further, the honourable member might expand a bit more on what she is asking.
The Hon. H.M. GIROLAMO: Sure, I am just wondering whether there are other investments being considered to counteract the losses that were, because obviously all the Russian investments are written down to zero and that is negatively impacting on people’s superannuation. Are there other avenues being explored to make sure that there are not significant losses for South Australians?
The Hon. K.J. MAHER: I thank the honourable member for her question. I am advised that there has not been a necessity to look for strategies to replace the exposure to Russian equities. I am informed that some 7,000 securities are invested in and that the component of Russian equities had made up, when it had any value, some 0.14 per cent of Funds SA’s equities.
Clause 2 passed.
The Hon. H.M. GIROLAMO: In regard to the annual review, when would you expect that to happen and what are the terms of reference likely to be?
The Hon. K.J. MAHER: I thank the honourable member for her question. I am advised that should this bill pass and become a legislative requirement the corporation would look to attach that to its annual reporting requirement.
The Hon. H.M. GIROLAMO: Just in regard to the development of the legislation: was a sunset clause contemplated by the government, basically having a length of time that this was in place rather than it being indefinite, or is there a reason behind making it an indefinite period?
The Hon. K.J. MAHER: I thank the honourable member for her question. I am advised that it was thought about but not enacted because there is no certainty as to how long this conflict will go on, and that is, I am advised, one of the major purposes of clause 5, to have that annual review given that there is no certainty about how long the conflict of Russian aggression in Ukraine might occur.
The Hon. H.M. GIROLAMO: What protection will be in place to ensure the directive is adhered to and not taken any further than intended?
The Hon. K.J. MAHER: I thank the member for her question. That is a reasonable question. That is very specifically why it has been drafted in clause 3, new subsection (3), to only give this power of direction in relation to the divestment of Russian assets. It could have been drafted a number of ways, and one of the ways could have been as I understand the New South Wales legislation operates, to give the minister a very general power of direction, but for that very reason to ensure that it is only in relation to the issue that we are talking about: investment in Russia. Clause 3, new subsection (3), makes it clear it is only in relation to divestment of Russian assets.
The Hon. H.M. GIROLAMO: Is there any sort of time line in place with Funds SA in regard to the liquidity returning to enable divestment of the Russian investments or will you keep monitoring it each year?
The Hon. K.J. MAHER: My advice is it is under constant monitoring. At the moment, as I said, the $12 million of direct investment is being written down to zero with absolutely no liquidity and no prospect of sale, but it is not just monitored annually but monitored constantly by fund managers.
The Hon. H.M. GIROLAMO: My final question is: what is the mechanism to remove this directive?
The Hon. K.J. MAHER: The mechanism, I am advised, to effectively make the directive have no work to do is new subsection (5), that annual review of the operation of (3) and (4). If it is not necessary that can be part of that annual review.
Bill reported without amendment.
The Hon. K.J. MAHER (Minister for Aboriginal Affairs, Attorney-General, Minister for Industrial Relations and Public Sector) (16:37): I move:
That this bill be now read a third time.
Bill read a third time and passed.