Super Fund Shift Signals Growing Market Focus On Climate Cha

Super Fund Shift Signals Growing Market Focus On Climate Change

INSIGHTS ABOUT THE NEWS - The NZ Superannuation Fund’s shift from carbon emissions intensive investments is a further sign long-term investors are putting more and more emphasis on weighing up climate change risk.

This includes not only the impact of climate change (which is weighing heavily on the minds of insurers), but also the effect of policies to mitigate climate change.

As reported in the NZ Energy & Environment Business Alert, the Super Fund has moved $950m out of 297 companies with high exposure to carbon emissions and reserves into lower-risk companies. It says this means 40% of the $35bn fund is now low-carbon. The shift means the fund's carbon emissions intensity is 19.6% lower and its exposure to carbon reserves is 21.5% lower.

Much has been made of this, but the obvious flip side is 60% is not low carbon and the Fund has no plans to exit all energy companies even if they are considered high emitters. In fact, the shift in investments with a high emissions intensity was made with very small changes.

What it does represent is a fund with a long-term focus to make returns decades ahead. This means not weighing up the risk not only of the impact of climate changes, but an evaluation share prices do not reflect how international policy fluctuations to mitigate climate change will hit them.

It is an interesting policy conundrum for the fund and its political masters. The Super Fund was not set up to be a moral guardian or a policy influencer.

Its main purpose is to build up money to help pay for future superannuation payments. Of course, it was told to make ethical investments, but its main purpose is make money.

Its investment to create and sell Z Energy shows it can make money from oil and as the Petroleum Production and Exploration Association said other investors think oil and gas still have bright prospects.

The question for the Super Fund is it getting the balance right to manage future risk and maximising returns? Or does it see its role as driving policy?

Trans Tasman’s sister publication, NZ Energy & Environment Business Alert, is a weekly source providing you with in-depth news, analysis and opinion on NZ’s energy and environment sectors.

ENDS

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