Photo: 123RF
The managers of the New Zealand Super Fund say they apply a sustainable finance and climate lens to every activity they have.
It comes after New Zealand First MP Andy Foster lodged a member's bill promising to end "woke ideologies", which leader Winston Peters said are being driven by "unelected, globalist, climate radicals".
The Guardians of New Zealand Superannuation appeared at the Finance and Expenditure select committee on Wednesday morning to brief MPs and answer questions.
Co-chief investment officer Will Goodwin said climate change was a core risk to their long-term investments.
"It's really important to understand that, again, because of the horizon in which we invest over, climate is a real financial risk that we need to price and understand into our portfolio.
The Guardians of New Zealand Superannuation co-chief investment officer Will Goodwin. File photo. Photo: NZ Super Fund / Supplied
"If we're taking very, very long-term views, the asset values will ultimately be impacted by, potentially, climate change."
Chair John Williamson said the Guardians, who oversee the investment of the NZ Super Fund and the smaller Elevate NZ Venture Fund, consider sustainable investment for everything they look at investing in.
"And it's embedded in the culture of our investment team."
Goodwin said climate change was "ultimately in the long-term a financial risk that we need to be understanding and pricing into a lot of our investment decisions, so therefore it makes sense for us to be doing that on every single investment that we make".
He said they had set goals of reducing the emissions intensity of investments by 40 percent, and reducing investment in fossil fuel reserves by 80 percent - but had far surpassed those targets, making reductions of 65 percent and 98 percent respectively.
The board in 2022 approved a change to Paris Agreement-aligned indices for passive investments.
"A large portion [75 percent] of our portfolio is invested in global equities, and what we have done is transition that portion of our portfolio into what's called a Paris-aligned index.
"What that is doing - and it's run by MSCI - is investing in optimising that portfolio, that cluster of companies, to hit net zero by 2050.
"So it's excluding high-emitting and [fuel] reserve companies and reinvesting and focusing on greening companies."
"Our commercial returns have not been inhibited in any way, we believe, by our sustainable investment policies and practices. So we are comfortable travelling as we are.
"We're not wedded irreparably to our current position but it's a position we enjoy at the moment and it's working well for us."
The lack of negative effects from the sustainable financing approach is backed up by data showing portfolios with a "Responsible Investment" approach were not markedly different to a benchmark portfolio that did not use such an approach.
A graph showing that the NZ Super Fund implementing sustainable investment exclusions and decarbonising the portfolio has not affected investment returns to date. Photo: Guardians of NZ Superannuation 2023/24 Review presentation
While the US has pulled out of the Paris Agreement, Williamson said the board was "very committed to our current sustainable investment strategy ... and we're not overly distracted by what's happening in parts of North America, and nor I believe is the rest of the world, the investment world".
He noted the Paris-aligned index was not directly correlated to whether or not countries were part of the accord or not.
Goodwin said a feature of the index was that while it excluded some companies, it gave more weighting to others - like technology companies - which the fund had benefited from.
"It presents a lot of opportunities, as well as risks, from an investment standpoint," Williamson said.
Williamson said the NZ Super Fund was "at a key point in its evolution", expected to reach $100 billion within the next five or six years.
Chief executive Jo Townsend, who has been in the role for a year, also repeated the Guardians' stance that a tax-free fund would be a more efficient approach.
The amount of tax the fund pays is set to remain higher than the amount the government has been putting into it, and Townsend suggested the government could stop taxing the fund, dropping contributions by the same amount.
"It is money in, money out. If we weren't having to pay tax that would actually create efficiencies for us.
"We get a contribution in, we have to invest it. If we make a tax payment out we actually have to raise cash to do that, so purely from the perspective of having to transact less in the market that would be a more efficient outcome."
Asked if the government had indicated it would do so, Townsend said that would be a question for the government to answer, but the fund's managers have been engaging with the government as required.
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