16 Aug 2017

NZ Super Fund's fossil fuel sell-down 'just one opinion'

7:41 am on 16 August 2017

The oil and gas business has a strong future despite substantial divestment by the New Zealand Super Fund, the lead industry body says.

Air pollution from a car's exhaust pipe (file photo)

Photo: 123RF

The $35 billion fund has substantially or completely withdrawn from 300 companies, including some of the world's biggest oil companies such as Exxon Mobil, Shell, BP and Statoil, calling them risky investments.

The move, affecting the fund's $14bn passive equity portfolio, involved about $950 million in shares.

It said it feared its value might be at risk if too much money was tied up in oil and gas.

The fund's chief investment officer, Matt Whineray, said there was a significant risk, which had not been factored into the market. The worry was that climate change jitters would dry up economic returns from oil and gas companies and cause their share prices to shrink over time.

The Petroleum Production and Exploration Association said that was just one opinion, however, and other investors thought oil and gas still had bright prospects.

Its chief executive, Cameron Madgwick, said oil and gas had a good future.

"There are a number of financial analysts and they will assess all kinds of risks," he said.

"The New Zealand Super Fund has taken a particular approach to that risk assessment, but there are other shareholders in those companies who are clearly taking different views, which suggests that those companies are going to be around for a long time.

"The world has a strong demand for energy and we think our industry will play a big part in helping to be a part of the energy mix into the future."

Exxon Mobil's share price has risen significantly since 2000, while Shell's has been steady and BP's has see-sawed around a steady base.

However, Responsible Investment Association of Australasia CEO Simon O'Connor said that would not last.

"Global investors have seen the writing on the wall for fossil fuels, and whether that is a fast move or a slow move, there is certainly a shift to prepare themselves for a future that is less reliant on fossil fuels."

Green Party leader James Shaw said he was thrilled the Super Fund had spurned the fossil fuel industry.

"This is very big news," he said. "The New Zealand Superannuation Fund has divested almost a billion dollars from high risk fossil fuel companies.

"We think that is absolutely groundbreaking actually, and it just brings home the huge economic shifts that are happening overseas as the world transitions towards a low carbon economy."

There is near consensus among scientists that fossil fuels cannot be burnt indefinitely without inducing serious climate change, but there is unresolved debate about whether that makes oil and gas a sunset industry or one with a very long twilight possibly lasting decades.

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