Expect to see state-owned investment funds move more quickly into green technology in the next few years, following a new Government directive.
Those which haven't already will also need to accelerate their shift out of fossil fuel investment.
Finance Minister Grant Robertson has today launched a new investment framework that will require Crown Financial Institutions to ensure their investment decisions reflect the Government's goal of a carbon neutral New Zealand by 2050.
The Crown Responsible Investment Framework will primarily affect the NZ Super Fund, the Accident Compensation Corporation, the Government Superannuation Fund and the National Provident Fund, which collectively manage over $100 billion of investments on behalf of New Zealanders.
Speaking at the Institute of Finance Professionals New Zealand (INFINZ) conference this morning, Robertson said New Zealand still had a significant way to go to meet the commitments around climate change that it had made internationally.
It was clear that the Government could not meet those on its own and it would need to be achieved in partnership with business, he said.
"So I have issued this framework - along with ACC Minister Carmel Sepuloni - to convey our expectations about what responsible investing policies are."
The framework has been developed with the CFIs and the four organisations issued a joint statement, saying they welcomed the move.
It is a "principles-based framework" which will focus on three broad themes:
- Measurement of a fund's carbon footprint
- Reduction of that footprint
- Influencing the behaviour of organisations in which it has an ownership stake.
With regards to reduction the primary goal would be for funds to be carbon neutral by 2050.
But the framework requires them to set "challenging minimum carbon reduction targets" at interim periods.
The first interim target would be for 2025 with a refreshed target every five years thereafter.
The framework would maintain the investment independence of the funds and the Government would not be getting involved in making any specific investment decisions, Robertson said.
This model did involve a good deal of trust in the leadership of the sovereign funds, Robertson said. But he had a high degree of confidence in that leadership.
This "long-term commitment to decarbonising the NZ Super Fund" represented a significant maturation of its existing climate strategy, said NZ Super chief executive Matt Whineray.
The NZ Super Fund's climate change strategy was already based on an investment view that the impact of climate change has been under-priced by global markets, Whineray said.
"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."
The four funds will respond to the Minister of Finance, and in the case of ACC, the Minister for ACC, by December 31, 2021, setting out how each will give effect to the Framework over the five years to 2025, and how they expect to transition to net zero between then and 2050.
Robertson said the focus of the framework was on climate change goals for the time being but could in the future evolve to include wider goals around environment, social and governance (ESG) issues.