Pensions investor’s Genesis exodus

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 to prepare for climate change.

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.

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

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

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,’’ he said.

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

Whineray said reducing exposure to carbon was a low-cost insurance policy, given financial markets were under-pricing climate change risk.

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

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

Genesis Energy, which owns the Huntly Power Station, said it was not concerned by NZ Super’s move. The recent weather showed the importance of 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.

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