ACC fossil fuel investments criticised by climate action group

14th Dec. 2021

Climate action group 350 Aotearoa says ACC has work to do if its investment portfolio is to match the Government’s climate commitments.

This article originally featured on Stuff and was written by Daniel Smith.

Climate action group 350 Aotearoa says ACC has work to do if its investment portfolio is to match the Government’s climate commitments.

On Tuesday, 350 Aotearoa, in collaboration with Mindful Money, released a report estimating that almost $750 million of ACC investment is in fossil fuel companies, although ACC denies that.

The money invested by ACC, a Crown entity, is collected through levies paid by taxpayers and invested on behalf of the Crown.

Alva Feldmeier​, the executive director of 350 Aotearoa, said that based on the rising calls for climate action, many people would be upset to find their tax dollars were invested in fossil fuel companies.

350 Aotearoa was demanding ACC announce a commitment to divestment of its fossil fuel investments by the end of this year, Feldmeier​ said.

In a letter to ACC last year, Finance Minister Grant Robertson noted a Government expectation that “ACC [would] accelerate its moves to divest from investments in fossil fuels”.

But ACC chief investment officer Paul Dyer​ said the insurer did not have $750m invested in fossil fuel companies.

Dyer​ said ACC used a different definition of a fossil fuel company based on Global Industry Classification Standards (GICS).

ACC's investment in fossil fuel companies was about $470m, he said.

But Mindful Money chief executive Barry Coates​ defended the research as sound.

“If a company receives a minimum amount of revenue from the fossil fuel sector, we define them as a fossil fuel company. We apply 0 per cent for coal, and 5 per cent for oil and gas.

“This approach is absolutely standard for the major data research companies and is applied by every major fund in New Zealand. It is strange for ACC to claim it is out of step,” Coates​ said.

Associate Professor Ivan Diaz-Rainey​, the director of the climate and energy finance group at the University of Otago, said the different ways of assessing fossil fuel companies was a complex issue.

Diaz-Rainey​ said that while the Global Industry Classification Standards method used by ACC was widely accepted as standard, it often only afforded a cursory look at the company activities.

“The reality is often more complex than GICS. Fossil fuel exposure does not always occur only through fossil fuel companies. Energy utilities also cause a great deal of exposure as they are the ones burning the oil and gas,” he ​ said.

ACC had made great strides in understanding those risks in the past few years, he said.

But both the Sustainalytics and MSCI screens used by Mindful Money were well regarded, and it would be difficult for ACC to argue they were inferior.

Dyer​ said neither method was wrong. It was just that the 350 Aotearoa research had “cast the net a lot wider” than ACC, he said.

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“When you look at how much revenue a company earns from the fossil fuel industry, if it is only a few percentage points, should you need to count it? Do you count firms in related industries such as transport and energy production?

“Both numbers are defensible,” Dyer​ said.

As a public fund, ACC was already aligned with what the Government had asked of it.

“ACC is 100 per cent committed to carbon neutrality by 2050. It also has intermediate targets in the short term, and we have been making good progress on that. We have brought down our investment in fossil fuel companies by 45 per cent in the last two years,” Dyer​ said.

But more than acting to please the Government, ACC also represented what the average person wanted to see their tax dollars invested in.

“We are mindful [that] as a public fund we need to act in accordance with what New Zealanders want. One of our guidelines for this is New Zealand law; another indicator is the policy guidelines of the government,” Dyer​ said.

Whether carbon neutrality by 2050 was fast enough was a decision for central government, Dyer said. He was happy with the pace of divestment at ACC.

But Feldmeier​ wanted ACC to act faster.

“ACC has the power to make or break fossil fuel projects. Our financial institutions represent one of the biggest opportunities for systemic change when it comes to divestment,” Feldmeier​ said.