Super Fund cutting investments in carbon emissions

The New Zealand Superannuation Fund has been divesting investments with carbon exposure as it believes the emission is currently underpriced and represents a risk for the future.

Outgoing Super Fund chief executive Adrian Orr told Parliament's finance and expenditure select committee this morning that the fund committed to reducing its portfolio exposure to carbon reserves by 40 per cent and carbon emissions by 20 per cent by 2020, and is "almost there now".

The decision to reduce the fund's exposure to carbon hasn't come under its ethical investment commitment, but instead under its mandate to maximise return without undue risk, Orr said.

Fund committed to reducing its portfolio exposure to carbon reserves by 40 per cent and carbon emissions by 20 per cent by 2020, and is "almost there now". Picture / 123RF

"We put it up there because it's our belief that carbon is mispriced globally, because there is no global price for carbon, and investment behaviours suggest at some point there is going to be winners and losers through this. We don't know what that looks like, so by not doing anything we are taking on undue risk - we're overexposed to carbon," Orr said.

"We swapped out close to $1 billion of assets from carbon to non-carbon companies, and you can do that overnight," he said. "The harder bit is about engaging with external managers about what their view is on carbon exposure to work on the remainder of the portfolio, as well as to assess investment opportunities going into the climate change world as well, alternative energies, ways of building communities."

"It's going to affect everyone in so many different ways, and it's saying how can we try to be at the front edge of those investment opportunities. That's hard, because it's going into the future, but the simpler part is first and foremost reduce our exposure."

Orr will leave next month to head up the Reserve Bank, with the fund's chief investment officer Matt Whineray taking over on an interim basis. The Super Fund has said it would like to find a replacement by mid-May, and said today it has appointed a recruitment agency for the task.