NZ Super Fund has announced a new strategy designed to address climate change risks that represent a “material” issue for long-term investors.
The strategy will be applied across the fund’s entire NZ$31.4 billion ($22.6 billion; €20.6 billion) portfolio, the New Zealand government savings vehicle said in a statement.
The institution intends to reduce its exposure to both fossil fuel reserves and carbon emissions through company engagement, emissions measurement and targeted divestments.
Climate change considerations will also be incorporated into NZ Super’s investment decision-making processes, the institution noted, adding that this would affect valuation models, risk allocation and manager selection. The fund also said as an active owner, it would revamp its voting policy and tell its investment managers to vote in accordance with its instructions contained in the climate change resolutions.
“In coming years the global energy system will transition away from fossil fuels. Some assets we invest in today may become uneconomic, made obsolete or face a dwindling market,” said Adrian Orr, the fund’s chief executive. He added that the fund would look to capture the investment opportunities created by climate change and the transition to a low-carbon energy system while aiming to “intensify its efforts” in areas including alternative energy, energy efficiency and “transformational” infrastructure.
To help it shape its climate change approach, the fund’s board studied strategies previously developed by Ap4, PGGM and other global investors, NZ Super said. It will now report its carbon footprint annually, starting from 2017.
Earlier this month, NZ Super teamed up with Kiwi-listed Infratil to invest up to $100 million in Longroad Energy, a renewables developer based in Boston, Massachusetts. The company’s main business is to develop utility-scale wind and solar plants throughout North America.