In a world first, a fund launches where investors get no return, the management company no fees and the government no tax. Instead, all the money from Nikko AM’s Freedom fund goes to prevent sexual exploitation and forced labour in the Asia Pacific.
In October 2019, in that far-ago pre-Covid time, Nikko Asset Management managing director George Carter attended an event. A lot of people gathered in a room. You may remember, it was a thing we did.
The event was a gala fundraising dinner organised by not-for-profit Tearfund NZ, and the speaker was a young Thai lawyer named Wiliyasinee Rinya. Her colleagues call her Pik.
Pik works for an anti-human trafficking and sexual exploitation organisation called Lift International based in Chiang Mai.
The group teams up with government agencies, law enforcement and others to investigate cases of human trafficking and sexual exploitation in Thailand, to rescue and support victims, to prosecute perpetrators and get compensation for victims.
It’s tough and sometimes scary work, says Tearfund chief executive Ian McInnes.
“We have to have investigative staff, analytics, people who can work with specialist software, act on sophisticated criminal networks - people posting images of kids in chatrooms with Northern European buyers, people on the dark web sharing pornographic material,” McInnes says. “You need a degree of sophistication to work on the cases we are dealing with.”
There aren’t enough staff to deal with all the cases. Lift’s 2020 annual report lists 204 information reports received over the year and 33 new cases opened. There were 103 victims assisted, 63 offenders arrested, 34 convictions, a total of 1,297 years of sentences imposed (an average of 38 years) and 6.7 million Thai baht ($287,000) compensation ordered.
Not numbers, stories
Carter is a qualified actuary. An actuary is someone who, according to the Investopedia definition “uses maths and statistics to estimate the financial impact of uncertainty and help clients minimize risk”.
Which is lucky. Nikko Asset Management has more than $8.345 billion under active management in New Zealand alone - worldwide the figure is US$282 billion ($400 billion).
Being a numbers guy is handy.
But what Carter remembers from that talk in 2019 isn’t the figures, it’s the stories of cases Pik and her colleagues are dealing with - an Israeli expat in Thailand who for years picked up women online with the express intention of getting into a relationship and then abusing their children; a human trafficker selling boys to customers at a popular tourist hot spot.
There was a particular case, Carter says.
“Interpol had alerted the team at Lift to a paedophile operating through online content and they had spotted by the clothes the kids were wearing they were probably somewhere in Thailand. Through their connections, they found out who the people were, how they were getting the content up onto the dark web, and managed to get the guy arrested, and rescue the children.
“I came away thinking ‘This is horrendous, and it’s bigger and worse than I ever realised.”
The International Labour Organisation estimates 24.9 million people worldwide are trapped in forced labour, and 4.8 million people are victims of forced sexual exploitation.
Two thirds are in the Asia Pacific region.
One more lawyer
Later in the evening, Carter chatted to Pik and asked her what the biggest constraint for the work she was doing.
“She said ‘I’m the only lawyer in Thailand doing it’.”
There are other organisations rescuing people from exploitation in Thailand, McInnes says, but Lift International is the only one working with law enforcement to bring the perpetrators to justice.
“And without that prosecution piece, when you rescue someone from a network you just create a gap and two victims - the child or the woman who was there before, and the one that replaces them.”
Prosecutions also send a signal to other traffickers, he says. "We estimate a trafficker moves up to 24 people in any one year. If we put one trafficker behind bars for a year, or make someone decide it's too risky to keep doing it, thats 24 girls per year.
"Over the last 10 yrs we've had 169 convictions in Thai courts and 3206 years of jail time. That's a lot of girls not being trafficked."
More lawyers meant more convictions.
Back to the 2019 event. Carter and the rest of the invitees were being encouraged to give money to Tearfund, which funds 25 percent of Lift’s $2 million annual budget, and is also involved in other poverty and exploitation alleviation projects around the world. Carter got his wallet out.
But afterwards he thought about what Pik had said about needing another lawyer to help, and about what McInnes told him about Pik regularly sleeping under her desk because there weren’t enough hours in the day to prepare cases for court if she went home every night.
And he talked to McInnes about the problems facing not-for-profit organisations of having to run long-term programmes with patchy, inconsistent funding.
“When you give money to an entity, it’s dollars for today but they don’t know what’s coming in tomorrow.
“What Pik and her team needed was a stream of money. And I thought ‘That’s what we do all day - create income streams’.”
A crazy idea
Nikko AM runs 15 investment funds in its New Zealand retail scheme. Carter’s idea was to create another actively managed fund, where instead of Nikko charging fees and customers getting returns, all the fees and the returns went to Tearfund’s modern slavery work.
Because the fund wouldn’t make money, it shouldn’t have to pay tax either, Carter reckoned. The advantage of his proposed fund over other forms of donations - in particular an investor making money and then giving it to charity - is the tax- and fees-free structure means more money goes to the charity, Carter says.
For a $100,000 investment with a 2 percent return, for example, Tearfund would get $2000 over a year, as compared with $1224 if someone donated the investment gains from a similar PIE managed fund, or $670 if they donated returns from a term deposit.
Carter reckoned it might take six months to get the new fund running. In fact it took two years and an estimated $10,000 worth of pro-bono work and advice from Nikko partners including KPMG, Chapman Tripp, Public Trust, MMC and BNP Paribas.
Not only were there all the structures to work out – Carter doesn’t think this sort of fund has ever been set up before, anywhere in the world – but he had to convince everyone from a sceptical Inland Revenue Department to the Nikko boss in Japan the fund was legitimate and practicable.
“I guess there was a degree of scepticism - will investors be interested in a fund that generates no return?" – Ian McInnes, Tearfund
Nikko’s Freedom Fund launches today, with a $1000 minimum investment.
Did Tearfund’s Ian McInnes think they would get there? Did he wonder if it wasn’t just a crazy idea when George Carter first approached him?
“I did think it was ambitious. We knew George as an individual donor, but I didn’t know he ran a wealth management enterprise.
“I guess there was a degree of scepticism - will he do it, will investors be interested in a fund that generates no return, will Nikko go for it?”
Anyone want to earn nothing?
Now all Carter needs to do is persuade people to put money in.
“We’ve got a few sorts of people in mind. For example, people with rainy day money in the bank - money they might need at short notice to pay a bill or travel overseas to visit a sick relative. It might be sitting in a term deposit making very little money, or if it’s more easily accessible, it could be earning nothing.”
As an alternative, a philanthropic investor might choose to put that rainy day money with the Freedom Fund, where it will earn money for charity, but still be accessible within 1-2 days, Carter says.
Another potential source of investment funding might be a company’s working capital.
“It’s not impossible a company might have $1 million of working cash flow and they could put say, $10,000 or $50,000 into this fund. It will earn money to help victims of modern slavery, while at the same time be easily accessible.”
Traditionally, charities have relied solely on people or businesses giving their money away, he says. “By allowing us to employ our investment expertise to use some of their savings or capital to generate income, we’re providing a new option for them to donate without donating, while still being able to access their money at any time.”
There’s not much marketing budget, and the formal launch, originally planned for this week, is unlikely to happen this year, Carter says. Instead he’s relying on word of mouth.
“I’m mooting it with friends and other executives - having coffee and chatting to people - and people say it’s a cool idea. I suspect word will percolate.”
The minimum investment is $1000. The aim is to get to at least $2-3 million in investment, as soon as possible, and $50,000 of returns a year.
The cost of hiring a lawyer in Thailand is $47,000, McInnes says; the average modern slavery case, from investigation to prosecution, costs $10,000 - for one survivor.
“It's a high unit cost, but what price do you put on someone’s freedom?”
McInnes was born in Southland and grew up in Feilding. His first experience of international aid and development came randomly in 2004, when he and his wife Himali, a Sri Lankan-born GP, author and contributor to Newsroom’s ReadingRoom happened to be in Sri Lanka during the Boxing Day tsunami there.
The couple stayed on to help with the tsunami response and then the ongoing civil war, and McInnes remained in the disaster response area, going to help in Myanmar, Haiti, Pakistan and Samoa.
He says New Zealand lags other countries when it comes to people recognising modern slavery as a critical global issue and wanting to see change.
Most people here have grown up with the idea that slavery is something that happened elsewhere and was abolished 200 years ago, he says. In fact, International Labour Organisation statistics show it’s a bigger problem than it has ever been.
While the UK and Australia have Modern Slavery legislation, several proposed Members' Bill have failed here. In March the Ministry of Business, Innovation and Employment published a plan of action around combatting modern slavery and in September, the University of Auckland's Centre for Research on Modern Slavery published a white paper calling for the Government to "take up arms against this global atrocity".
Carter says he hopes the Freedom Fund will also help promote understanding that sexual exploitation of women and children, seemingly far away in the Asia Pacific, can feed a market close to home, and the products we buy might easily be produced using forced labour.
“As consumers, we can quite easily become unwitting beneficiaries of exploitation. Therefore, our aim – and the aim of our partners who have provided their time and expertise for free to help us set up the Freedom Fund – is not simply to address abuse and suffering through donations, but also to help Tearfund NZ raise awareness here of how we might help by making more informed choices.”
Tearfund’s latest annual Ethical Fashion Guide Aotearoa New Zealand – a list of how our clothing brands rate in terms of labour exploitation and safe, fair, working conditions – is also out this week.
