Survey covers NZ$331b in AUM, estimated at 73% of total New Zealand AUM
Key findings include:
- Most New Zealand wealth managers have yet to meaningfully engage on climate issues
- Most asset owners are not proactively setting mandates for fund managers to incorporate climate risk and opportunities
- Top-down climate governance from investors is lacking
- Investment in climate solutions (and associated targets) is low
The survey also highlights positive developments that provide a platform for further action:
- Investors of all sizes are progressing with annual climate reporting, even those not covered by the upcoming climate-reporting regulation
- Over half (58%) of investors now have a climate policy in place – ideally this will continue to rise to 100% over the next 12 months.
“Progress has been slow over the past year, but our survey revealed an appetite in the industry to lift its climate game. 2023 could yet become a turning point as the public and finance sectors sharpen their focus on both the risk of climate impacts, and the huge opportunities of a net zero-aligned economy,” said survey co-author and Mindful Money founder and chief executive Barry Coates.
The main findings from the second annual survey by the Aotearoa New Zealand Investor Coalition for Net Zero are released against the backdrop of the ongoing COP27 climate summit in Egypt, and scrutiny of pledge-making by financiers globally to reduce emissions across their portfolios to ‘net zero’ by 2050.
Survey Respondents
The survey’s 50 respondents were New Zealand asset owners, fund managers and wealth advisors, who collectively manage $331bn in assets – equivalent to an estimated 73% of the total assets under management in New Zealand.
Barry Coates said, “A year ago, there was a burst of energy and enthusiasm for net zero around the investor community. Our survey reveals that momentum has waned. We identified only three new pledges with internationally recognised initiatives, and four new commitments. And, with a few notable exceptions, pledges haven’t yet been translated into meaningful action to reduce portfolio emissions.
“The survey did reveal an aspiration to deepen climate action. We hope that by showing where progress needs to be made, and by highlighting net zero leaders – which include both large institutional investors and boutique funds, these findings will accelerate investor action,” Barry Coates said.
Investors can put more capital into companies in transition and into climate solutions; drive emission reductions by directly engaging with companies according to robust escalation and voting policies; stop financing new fossil fuel-related projects; and develop fund-wide climate action plans which are supported and adopted by senior management.
Barriers to Investment
A lack of data, tools and definitions around climate investing and net zero strategies was identified in the survey as the biggest barriers to more climate-aligned investing.
Jo Kelly, chief executive of Toitū Tahua: Centre for Sustainable Finance, said, “A positive recent development is New Zealand’s Stewardship Code, which provides investors with a framework for voting, engagement and influence of companies, including around reducing emissions. Also, mandatory climate-related financial disclosures provide a solid basis for investors to understand the financial risks of climate change.
“But we absolutely need further work on data, and on the definition of climate solutions, so investors can more confidently shift capital in that direction,” Jo Kelly said.
Global Comparisons
Comparison to data from a forthcoming Australian survey, run in parallel by the IGCC, showed New Zealand’s finance sector was behind its neighbour on virtually every measure surveyed, including climate measurement and reporting, even though New Zealand is one of the first countries in the world to mandate climate reporting. New Zealand also lagged on net zero targets, engagement, governance, and scenario analysis.
Best Practices and Available Tools
IGCC Chief Executive Rebecca Mikula-Wright said, “Leading investors globally and in Australia are setting targets across four areas: decarbonisation, climate solutions, asset alignment and their engagement threshold. Combined, these targets offer the best means of driving emissions reductions in the real economy while enabling accountability through a practical and rigorous approach.
“Kiwi investors have the opportunity to catch up fast. There are excellent tools and frameworks to help get started, such as the globally supported net zero investment framework. Investors can also accelerate their climate progress by joining the collaborative peer forums that connect to the experts in this fast moving field.
“Across the world, investors’ clients are demanding progress on climate, and we know that action now will have the greatest net benefit for beneficiaries, for the economy, and for the social and environmental systems that support us all,” said Rebecca Mikula-Wright.
The survey executive summary, highlights examples of asset owners and fund managers making commitments and driving down emissions in their portfolios. These leading practices, which will be profiled in the full report and launch seminar, show the benefits from early action.
Barry Coates said, “It is disappointing that the sector as a whole is not yet responding to demands from consumers and institutional clients and grasping opportunities to attract the growing pool of climate-focused international capital by leveraging New Zealand’s international reputation. In the full report, we will outline actions our three organisations will take to support further investor climate action.”
About the Aotearoa New Zealand Investor Coalition for Net Zero
The Coalition was formed in 2021 to encourage and support investors to deepen their climate action.
Its core group consists of Toitū Tahua: Centre for Sustainable Finance, Mindful Money and the Investor Group on Climate Change (IGCC), with support from the Sustainable Business Council, Sustainable Business Network, Toitū Envirocare and the Responsible Investment Association Australasia (RIAA).
This is the second annual survey by the coalition to understand progress of New Zealand investors on their commitments.
About Toitū Tahua: Centre for Sustainable Finance
Toitū Tahua was founded in 2021 to accelerate progress towards a sustainable, inclusive financial system. Its work is anchored in the Sustainable Finance Forum Roadmap, which calls for changing mindsets, transforming finance and financing transformation. The Roadmap had input from more than 200 people across the public, social and private sectors, iwi/Māori and academia. The Centre’s partners include Crown entities, strategic philanthropists, major banks, insurers and professional service firms.
About Mindful Money
Mindful Money is a charity, established to facilitate the shift of capital away from harmful investment towards climate solutions and positive impact. Mindful Money’s website enables investors to understand where their KiwiSaver and investment funds are invested, and to find a fund that meets high ethical standards. This transparency is supported by seminars and guides that educate and empower investors to align their investment with their values. Mindful Money engages across the finance sector, exposing greenwash, supporting progress and celebrating good practice through annual awards,
About The Investor Group on Climate Change
We are a leading network for Australian and New Zealand investors to understand and respond to the risks and opportunities of climate change.
Our members manage more than $30 trillion with beneficiaries including more than 7.5 million Australians and New Zealanders. Members include our countries’ largest superannuation and retail funds, specialist investors and advisory groups.
We are a not-for-profit and our work is funded by members’ fees and philanthropy from supporters who understand the power of capital to support climate action.