NZ Super Fund signs up to net zero carbon emissions by 2050 or sooner - joins Net Zero Asset Owners Commitment
POSTED ON: 28 October 2021
The NZ Super Fund is taking further steps to decarbonise its investment portfolio, signing up to a global best practice framework to help it achieve net zero carbon emissions by 2050.
The Paris Aligned Investment Initiative is a global forum which supports investors to align their portfolios and activities with the Paris Agreement to limit global warming to 1.5ºC. Through the Initiative’s Net Zero Asset Owners Commitment, investors pledge to decarbonise their portfolios by 2050 or sooner, increase investment in climate solutions, set interim targets and undertake advocacy and engagement in line with net zero goals.
Matt Whineray, Chief Executive of the Guardians of NZ Superannuation, the manager of the Fund, said: “This long-term commitment to decarbonising the NZ Super Fund represents a significant maturation of our existing climate strategy. To date, the NZ Super Fund’s climate change strategy has been based on an investment view that the impact of climate change has been under-priced by global markets. As a result of this, we have already significantly reduced the Fund’s emissions footprint, and no longer have any material, long-term holdings of fossil fuel reserves.”
“Climate change continues to present a long-term risk to investment portfolios and it is clear that commitments to achieve net zero by 2050 and align with a 1.5ºC net zero emissions future are becoming best practice for leading institutional investors. Committing the NZ Super Fund to net zero is consistent with our legislative mandate to invest the Fund in line with best practice portfolio management, our recent shift towards sustainable finance and the New Zealand Government’s commitment to the Paris Agreement.”
Mr Whineray said getting a large and complex investment portfolio like that of the NZ Super Fund – which is projected by Treasury to be worth in excess of $330 billion by 2050 – to net zero, without compromising long-term investment returns, is a challenging task.
“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.”
Mr Whineray said he was excited by the commercial opportunities for the Fund to invest in climate solutions both in New Zealand and internationally. “We’ve made a number of investments in climate solutions in recent years. Under the Commitment we will set and report against specific targets for investment in climate solutions.”
All investments would need to meet the Fund’s commercial parameters, Mr Whineray said.
Bridget Coates, Chair of Toitū Tahua: Centre for Sustainable Finance, said: “Ensuring a just transition to net zero for the New Zealand economy requires urgent, action-oriented collaboration between the private and public sectors. Institutional investors have a key leadership role, including in setting clear expectations of their investee companies and allocating long-term, patient capital to finding solutions to climate change. Many other New Zealand investors are also considering net zero commitments and I am sure this move by the NZ Super Fund will encourage private sector fund managers to follow suit”.
Estelle Parker, Executive Manager – Programs at the Responsible Investment Association of Australasia (RIAA), said: “The world is not on target to meet the Paris Agreement commitments and urgent action is required if global warming is to be limited to 1.5ºC. Net zero decisions, which we are pleased are now being made by an ever-increasing number of global investors, are critically important. They will direct capital flows away from carbon intensive activities and towards positive climate solutions.”
Rebecca Mikula-Wright, Chief Executive Officer of the Investor Group on Climate Change, said: “We’re delighted to have the NZ Super Fund, which has a global reputation for climate change leadership, on board with the Paris Aligned Investment Initiative as we seek to accelerate the transition toward net zero emissions. 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 Initiative’s framework helps investors on the pathway to net zero, providing metrics and methodologies for four asset classes (sovereign bonds, listed equity and corporate fixed income and real estate). Work is underway to establish approaches for infrastructure and private equity, how to align to net zero for derivatives as an asset class, and broadening the scope of strategies and asset classes covered by the framework, including hedge funds.
Commitment signatories represent more than US$2 trillion and include leading global investors ABP (Europe’s largest public sector pension fund), AP2 (Second Swedish National Pension Fund), AP3, BT Pension Scheme, HESTA, NEST Corporation, New York State Common Retirement Fund and PensionDanmark, along with fellow New Zealand Crown investors ACC, GSF and NFP.
The Paris Aligned Investment Initiative is delivered by a group of investor networks including the Investor Group on Climate Change, of which the NZ Super Fund has been a member since 2008.
Major NZ Super Fund investments in climate solutions include significant wind and solar generation developments managed by US-based renewable energy developer Longroad Energy, waste-to-energy company LanzaTech and a $200m sustainable energy mandate with Copenhagen Infrastructure Partners.