A New Zealand Super Fund report on how the NZ$47 billion ($31 billion) Auckland-based sovereign wealth fund is managing climate change risks said it had exceeded targets set four years ago for reducing the carbon intensity of its portfolio.
And that progress in lowering the fund's exposure to investments most at risk from climate change has helped rather than hurt investment returns, the report contended.
"We haven't seen an adverse effect on performance," noted CEO Matt Whineray in the report.
"In fact, the carbon exclusion policy has added approximately NZ$800 million to the fund and about 60 basis points per annum to performance since it was brought in," reducing an insufficiently rewarded risk while adding return, he said.
In 2016, New Zealand Super set targets of reducing its portfolio's emissions intensity by 20% and its exposure to potential emissions from fossil fuel reserves by 40% by 2020. "We're proud to say we met our targets early," Mr. Whineray said.
Mr. Whineray said with NZ Super's 2020 targets met, "we have set new, more ambitious targets and now aim by 2025 to reduce the emissions intensity of our portfolio by 40% and fossil fuel reserves by 80%."
The aim of the strategy is to lower the entire fund's exposure to investments that are most at risk from climate change policy, and to mitigate the risks during the transition to creating a low-carbon economy by removing investments "with the highest emissions intensity and potential emissions from reserves," the report said.
The government of New Zealand announced recently it will require entities in the country's financial sector – publicly listed companies as well as crown financial institutions, including the NZ Super Fund — to report on climate risks, based on the framework outlined by the Taskforce on Climate-related Financial Disclosures.