Investors in a race to zero

Mindful Money has formed a coalition of organisations to encourage and support investors to deepen their climate action, Barry Coates explains why it is so important.

Thursday, November 4th 2021, 12:21PM

by Barry Coates

World leaders meeting at the climate summit COP26 have more evidence than ever that climate change is a growing threat to people, species and the economy. But forging political consensus across almost 200 countries is a daunting task.

This makes it more important than ever for businesses to reduce their emissions. Finance can be a crucial lever for change.

Leading investors are committed to switching from fossil fuel companies and high carbon emitters to low emissions companies; engaging with companies to reduce their emissions; and investing in climate solutions.

These are the key strategies that can significantly reduce greenhouse gas emissions in investment portfolios. This is also sound investment management - reducing climate risk, investing in companies with strong ESG credentials and seeking new investment opportunities as economies decarbonise.

More than half of global funds under management is now managed under a pledge to reduce emissions to net zero – for example, over US$43 trillion under the Net Zero Asset Managers Initiative.

International asset owners and fund managers are now requiring their fund managers have targets and plans in place to reduce greenhouse gas emissions.

The UN-aligned net zero pledge initiatives have integrity mechanisms. They are undertaken within a framework of entry criteria, verification and guidelines. Pledgers need to publish their interim targets and progress reports.

Those who pledge and forget will be held accountable. The pledges have impact and combined weight of global investment is becoming a powerful lever for change.

However, few New Zealand asset owners and fund managers have so far been at the forefront of climate action. This prompted Mindful Money to form a coalition of organisations to encourage and support investors to deepen their climate action.

The Aotearoa New Zealand Investor Coalition for Net Zero is being launched at a high profile event on November 4.

Mindful Money undertook a baseline survey of New Zealand fund managers and asset owners on behalf of the coalition. The coverage included nine of the ten largest fund managers and an 75% of estimated total New Zealand funds under management.

The survey revealed five pledges to net zero targets by New Zealand investors: BT/Westpac, Mercer Investments, Pathfinder Asset Management, Russell Investments and QBE Insurance.

Collectively, their funds under management amount to around $40 billion. Subsequently, the Crown Financial Institutions announced a net zero pledge by 2050 - the NZ Super Fund, Accident Compensation Commission, Government Superannuation Fund and National Provident Fund collectively administer around $110 billion.

The survey revealed that a huge 89% of the fund managers and asset owners surveyed are intending to make a net zero commitment. Net zero commitments are starting from a low base, but the survey results point to a rapid growth in pledges in future.

The Aotearoa New Zealand Investor Coalition for Net Zero looks forward to working with fund managers and asset owners, providing information, celebrating those making net zero pledges and reviewing progress towards their commitments.

Aotearoa New Zealand Investor Coalition for Net Zero comprises a core group of Mindful Money, Toitū Tahua: Centre for Sustainable Finance, and Investor Group on Climate Change (IGCC).

Supporting organisations are NZ Sustainable Business Council (SBC), Sustainable Business Network (SBN), Toitū Envirocare and Responsible Investment Association of Australasia (RIAA).

Information on Net Zero coalition is available on Mindful Money’s Climate Action webpages and on Toitū Tahua’s Net Zero webpage.

Register for the free launch seminar here.

Barry is the founder and chief executive of Mindful Money. https://mindfulmoney.nz

Tags: Barry Coates Climate Change climate risk reporting Mindful Money responsible investing