Last week, the High Court released its judgment in Nazzal v Guardians of New Zealand Superannuation [2026] NZHC 681, finding that the New Zealand Superannuation Fund's (NZ Super Fund) sustainable investment policy documents are unlawful for failing to meet the requirements of the New Zealand Superannuation and Retirement Income Act 2001 (NZS Act), which establishes the NZ Super Fund and the Guardians of New Zealand Superannuation (Guardians). The decision has since been the subject of criticism in the media.

A copy of the judgment is available here.

Who needs to read it? Why?

The position of the Guardians and the NZ Super Fund are unique in New Zealand, so that the decision is not directly applicable to other, private sector, entities. Further, the fact that it was a judicial review proceeding means that expressions in the judgment such as unlawful and unreasonable need to be interpreted in context. 

However, fund managers and others that use the NZ Super Fund investment policy documents as a base for responsible or sustainable investment commitments, need to consider whether the decision should trigger review of the way those commitments are applied.  

What does it cover?

The Guardians of New Zealand Superannuation, as the Crown Entity responsible for managing and administering the NZ Super Fund, must operate in accordance with the NZS Act. Relevantly, the NZS Act both requires the Guardians to invest the NZ Super Fund on a “prudent, commercial basis”, and to avoid “prejudice to New Zealand’s reputation as a responsible member of the world community”. 

Judicial review proceedings are legal actions whereby a person asks a judge to review whether a decision, act, or omission made by a public body or official was within the powers granted to them by law, rather than whether the decision was "right" or "wrong". If the decision, act or omission is outside those powers, it is described as “unlawful” (in a judicial review sense). “Unreasonable” also has a special meaning. Generally, it means that the decision is one that the Court decides no reasonable decision-maker would have made, and as such can overlap with unlawfulness - “a policy will be unreasonable if its making 'would not have been contemplated by Parliament as empowered by the relevant Act’”. Typically, the Court does not get to substitute its view for the public body’s, but can send it back to try again. 

In this case, the Palestinian Solidarity Network Aotearoa brought judicial review proceedings alleging that the investment policies, standards, and procedures (together the policy documents) the Guardians had established under the NZS Act did not comply with the “avoiding prejudice to New Zealand’s reputation” requirement and are to that extent unlawful. They sought declarations that 1) the policy documents were unlawful, and 2) that four specific investments were also unlawful as a consequence, or alternatively that the challenged investments directly breached the duties in the NZS Act.

Since approximately 2020, the Palestinian Solidarity Network has lobbied the Guardians to divest its interests in companies said to be complicit in human rights abuses in the occupied Palestinian territories. 

The four investments at the centre of the application for judicial review were the Guardians' holdings in US companies (which are all included in the S&P500 index):

• Airbnb Inc (approximate value NZD18.26 million);
• Booking Holdings Inc (trading and known as Booking.com; approximate value NZD48.556 million);
• Expedia Group Inc (approximate value NZD467,000); and
• Motorola Solutions Inc (approximate value NZD123.330 million).

The Guardians had, after extended correspondence with Palestinian Solidarity Network, concluded that none of the four companies met the exclusion threshold under their Sustainable Investment Framework. Accordingly, they were available for investment. By contrast, the Guardians had determined that five Israeli banks should be excluded. 

The Court held as follows:

• Statutory framework: The NZS Act requires the Guardians to invest the fund on a prudent, commercial basis and, in doing so, to manage and administer the fund in a manner consistent with avoiding prejudice to New Zealand's reputation as a responsible member of the world community. The NZS Act also requires the Guardians to establish, and adhere to, the policy documents, which must cover ethical investment, including policies, standards, or procedures for avoiding prejudice to New Zealand's reputation.
• Removal of key content since 2022: In June 2022, the Guardians edited their policy documents "to reduce content to aid clarity and focus on key procedures", removing references to the UN Global Compact and other substantive content. The current policy documents no longer linked exclusion directly to any human rights standards.
• Inconsistent application of thresholds: The evidence showed an inconsistent approach to decision-making, with references to several different thresholds not found in the policy documents themselves and no consistent adherence to written procedures.
• Policy documents found to be unlawful and unreasonable: So far as exclusion for alleged breach of human rights standards is concerned, the policy documents failed to meet the requirements of the NZS Act and are therefore unreasonable and unlawful (in the sense explained above). 
• Policy documents need to be reformulated: The Guardians have a duty to reformulate the policy documents consistently with the NZS Act. The Court noted that the evidence provides good reason for the Guardians to reassess whether the UN Guiding Principles on Business and Human Rights, described as the "global authoritative standard" in this area, should have a role in its policy documents.
• Relief granted: The Court considered it best to allow the Guardians to reassess the challenged investments pursuant to legally compliant policy documents. 
• The Court decided that it was not necessary to make an order to require the Guardians to divest the challenged investments.  

Our view

The effect of the decision is narrower than has been implied by some of the media coverage. Essentially, it means that the Guardians’ Sustainable Investment Framework was not sufficiently aligned with a requirement of the NZS Act, and was not consistently followed.

It should also be noted that the decision has attracted criticism. Christopher Finlayson KC (the former Attorney General) has publicly stated that, in his opinion, the judgment is wrong, on the basis that Parliament deliberately gave the Guardians a flexible mandate on ethical investment and that the issues raised are political and policy questions for an independent expert board accountable to Parliament, not the courts. Industry commentators have also suggested the ruling may drive changes at KiwiSaver providers and prompt a broader rethink of how the industry approaches ethical investment.

The Guardians have indicated they are considering their response, and there remains a real prospect of an appeal. In the meantime, we recommend that fund managers and other market participants with responsible investment obligations monitor developments closely. 

As the Guardians revise their policy documents in response to this judgment, those changes may have a flow-on effect across the broader industry, because some managers have cross-referred to the NZ Super Fund Sustainable Investment Framework, as a base or reference point for their own responsible or sustainable investment commitments. Fund managers, KiwiSaver providers, and other institutional investors should be alert to the potential need to review and update their own policy frameworks accordingly, including to ascertain what the effect might be on their commitments of the findings that the Guardians’ policy documents are unlawful and unreasonable – in a judicial review sense.

What next?

If you have any questions in relation to this judgment or are considering how it may affect your investment policies and obligations, please contact one of our experts.

This article was co-authored by Olivia Maher, a solicitor in our Financial Services team.