NZ Super’s exodus from Genesis

"Reducing the fund's exposure to carbon is a commercial decision." Matt Whineray of the NZ Super Fund

The NZ Super Fund has dumped more than $950 million in investments as part of a move to cut its carbon footprint, including its holding in a state-owned electricity company.

While the move has been welcomed by investment and environmental groups, NZ Super retains investments in hundreds of companies in carbon-intensive industries.

In October 2016 the $35 billion fund, established to help cover future state pension costs, signalled a ‘‘fundamental shift’’ to its investment strategy, pledging to cut its investment in fossil fuels and target clean energy.

Yesterday the fund declared that its global passive equity portfolio – which accounts for 40 per cent of the total fund – was now ‘‘low-carbon’’.

Sales of high carbon industries reduced the overall fund’s carbon intensity by just under 20 per cent, while the exposure to carbon reserves was cut by 21.5 per cent, compared to what it would have been without the sale.

The move does not exclude all carbon intensive companies from the fund, or even the passive portfolio.

A scan of the remaining investments in the fund shows it has investments in at least 29 airlines, including Air New Zealand, 139 companies in the ‘‘oil, gas & consumables’’ sector including Z Energy and close to 200 companies in the ‘‘metals and mining’’ sectors.

NZ Super said companies in high-carbon sectors which had been independently judged to have ‘‘strong management engagement with the challenge of climate change’’ would be maintained in the passive portfolio.

The fund ‘‘also still holds highcarbon stocks periodically due to the discretionary decisions of active managers’’.

Chief investment officer Matt Whineray said cutting exposure to companies at risk from climate change was not the same as other categorical exclusions, such as tobacco manufacturers.

‘‘Reducing the fund’s exposure to carbon is a commercial decision based on long-term risk to our portfolio as a whole,’’ Whineray said.

‘‘Companies have the opportunity to re-enter the portfolio in the future, if they improve their management of climate risk.’’

Reducing exposure to carbon was a low-cost insurance policy, given financial markets were under-pricing climate change risk over the long term, he said.

The move saw the Super Fund exit 297 companies, a spokeswoman said.

Two were based in New Zealand: New Zealand Oil & Gas and Genesis Energy, the electricity retailer and generator, 51 per cent owned by the Crown.

Genesis Energy, which owns the Huntly Power Station, said it was not concerned. The recent weather showed how important it was that New Zealand had a variety of energy sources.

‘‘As the long, dry winter of 2017 has shown, it’s nationally important for Genesis’ thermal generation to be on tap when required – to help ‘keep the lights on’ for NZ businesses and households,’’ a spokesman said.

‘‘Other investors, here and NZ, clearly continue to see and support the advantages of Genesis’ thermal (gas and coal) capacity.’’

The company said almost half of its generation in 2017 had been from renewable sources, compared to 16 per cent the previous year.

‘‘Our carbon intensity (the ratio of ‘kilotonnes of carbon dioxide equivalent’ to kilowatt hours) has in fact fallen by two-thirds since our peak year in 2006.’’

NZ Super said the sales it outlined yesterday took it a ‘‘long way’’ towards hitting its target to cut its exposure to carbon reserves by 40 per cent and the carbon intensity of 20 per cent, compared to what it would have been without the sale, by 2020.