19 Oct 2016

Super Fund's climate strategy a 'tokenistic gesture'

5:27 pm on 19 October 2016

A pledge by the New Zealand Superannuation Fund to invest less in fossil fuels and more in clean energy does not go far enough, critics say.

Offshore natural gas, oil

The New Zealand Super Fund has pledged to invest less in fossil fuels, and to reduce its overall carbon footprint. Photo: 123RF

About 5 percent of the Super Fund's $31 billion portfolio is invested in fossil fuel companies.

Super Fund chief executive Adrian Orr said some of these assets faced a dwindling market or would become obsolete in the future so it made financial sense to sell them.

"Our purpose is to to make sure that our portfolio maximises the return without undue risk, and climate change is one of those risks we have to have regard to," he said.

The Super Fund would not be dumping all fossil fuel investments, however, because some of the biggest producers were switching to greener technologies and a big investor could influence that process, Mr Orr said.

"A blanket ban doesn't get at what we're trying to achieve. Some of the solutions to future climate change risks come from current energy producing companies.

"The tipping point has come. We're working with at least half a dozen of global leading-edge investors around making direct changes to our investments," Mr Orr said.

Sell-down doesn't go far enough - 350 Aotearoa

Climate change lobby group 350 Aotearoa executive director Niamh O'Flynn said the strategy was a "tokenistic gesture" to the issues faced by climate change and it did not go far enough.

"We'd like to see the Super Fund rule out fossil fuels completely from their portfolios," she said.

And shareholder engagement with fossil fuel companies did not work, she said.

"The Rockefeller brothers spent years trying to engage with fossil fuel companies and eventually decided to divest because those discussions went nowhere and they hold significantly more financial and reputational clout than the Super Fund," she said.

Green Party co-leader James Shaw called for all government funds, including the larger $33bn fund run by ACC, to divest from companies directly involved in mining or fossil fuel production, starting with coal.

"ACC's lack of a climate investment strategy shows how inconsistent this government's approach is to managing climate change risks," he said.

The government has opened up half a million square kilometres of oceans for oil and gas spending since it signed the Paris climate change agreement in December, Mr Shaw said.

"It's hard for investment managers to show strong leadership when our government is sending mixed signals," he said.

As part of its strategy, the Super Fund would start measuring and reporting the carbon footprint of its investments each year from 2017.

It hoped to reduce its footprint over time but no target had yet been set.

It also would not name the companies it might divest from first, though it did plan to complete any sell-down by June 2017.