Funds' net-zero committment must be credible

Public disclosure will be crucial to the success of the Crown Responsible Investment Framework says Mindful Money's Barry Coates who also says "pledge and forget is not an option".

Friday, October 29th 2021, 11:23AM

by Matthew Martin

Minister of Finance Grant Robertson has announced that four of New Zealand's major Crown-owned investment entities - the NZ Super Fund, ACC, Government Super Fund and National Provident Fund - have committed to net-zero carbon emissions by 2050 or sooner.

The institutions' investment portfolios, which collectively total more than $100 billion, are to be aligned with a net-zero emissions economy and have joined the Paris Aligned Investment Initiative’s Net Zero Asset Owners Commitment, under which they will make reductions in portfolio carbon footprint in line with a globally-accepted pathway.

The funds will seek to invest in climate solutions in New Zealand and abroad, consistent with their respective investment strategies and commercial mandates.

They will also use their collective influence as asset owners to engage with companies on climate change and emissions reductions.

Coates says Mindful Money welcomes the commitment saying it sends an important signal to the financial sector.

"This is not just good climate policy in an era of severe climate risk, this is also sound financial policy.”

Coates says they will need to ensure the pathway to net-zero is credible, verified and transparent.

"Pledge and forget is not an option. Public disclosure will be crucial.

“Initial steps to establish climate impact funds by the Super Fund and ACC should be scaled up to invest in climate solutions, such as renewable energy, the circular economy and zero emissions transport.”

Coates says real emissions reductions will be required, not just offsets, and any offsets must be "...transparent, measurable, long term, additional and verified".

"This net-zero policy is sound financially, responsive to public wishes, important for re-orienting investment, and a signal to the broader financial community to follow with net-zero targets.”

Guardians of NZ Superannuation (the manager of the NZ Super Fund) chief executive Matt Whineray says meeting the net-zero target will be challenging.

“This long-term commitment to decarbonising the NZ Super Fund represents a significant maturation of our existing climate strategy."

He says the fund does not have any material, long-term holdings of fossil fuel reserves but it's not possible to get to net-zero simply by excluding carbon-intensive companies from investment.

"Companies from all sectors will need to make net-zero commitments and develop plans to get there by 2050, or sooner.

"We’ll be engaging with companies and working with our external investment managers to help achieve the ambitious level of systemic change that is required.”

Chief executive of the Investor Group on Climate Change, Rebecca Mikula-Wright says NZ Super’s commitment is an important signal to the rest of the New Zealand market as well as to the broader region and reiterates the importance of investors in managing systemic climate risks and seizing the opportunities in clean industries and infrastructure inherent in the net zero transition.

The four funds will respond to the Minister of Finance and the Minister for ACC by December 31 setting out how each will give effect to the framework over the five years to 2025, and how they expect to transition net-zero between then and 2050.

Tags: ACC Barry Coates Climate Change climate risk reporting government Grant Robertson Matt Whineray Mindful Money NZ Super Fund responsible investing