Court rules NZ Super Fund policy unlawful — but stops short of ordering divestment

A New Zealand High Court ruling on the country’s sovereign wealth fund has found its ethical investment framework unlawful, but stopped short of requiring divestment from companies linked to Israeli settlement activity.

The case challenged decisions by the New Zealand Superannuation Fund to retain investments in four companies — Airbnb, Booking.com, Expedia and Motorola Solutions — alleged by activists to be connected to activities in Judea and Samaria (the “West Bank”).

In a judgment delivered this week, the Auckland High Court ruled that the Fund’s responsible investment policies do not comply with its statutory obligations under the New Zealand Superannuation and Retirement Income Act 2001.

However, the ruling focused on process rather than outcome.

Justice Simon Mount found that the Fund’s policy framework lacked clear standards and could not be applied consistently, rendering it unlawful:

“So far as exclusion from the fund for alleged breach of human rights standards is concerned, the policies fail to meet the basic requirements of the Act… and are therefore unreasonable and unlawful.”

The Court ordered the Fund to reformulate its policies, but declined to rule that the investments themselves were unlawful or to compel divestment.

Instead, it stated that decisions about those investments should be revisited only after a legally compliant framework is in place:

“The best course is to allow the Guardians to make decisions… pursuant to legally compliant policy documents.”

Media coverage, including from RNZ and the New Zealand Herald, has described the ruling as a win for activists. But the judgment does not endorse their central claim that the Fund is legally required to divest.

The Court also addressed reliance on international material, including United Nations reporting and references to United Nations Security Council Resolution 2334, noting that such sources do not determine legal outcomes and must be treated as inputs rather than binding directives.

A key finding was that the Fund had applied inconsistent and undocumented thresholds when assessing potential human rights concerns, undermining the integrity of its decision-making.

The ruling effectively raises the bar for future decisions — requiring clear, intelligible standards and consistent application across cases.

The Super Fund said it is reviewing the judgment.

“We will thoroughly evaluate today’s decision and determine how best to respond,” chief executive Jo Townsend said, according to the New Zealand Herald.

While activists have welcomed the outcome, the Court’s reasoning suggests the case is less about mandating divestment and more about ensuring disciplined governance of public funds.

The decision leaves the substantive question — whether the Fund should divest — open, pending the development of a lawful and coherent investment framework.