Financing Net Zero Check in 2022 Live Stream
14th Nov. 2022
When it comes to reducing emissions across investment portfolios, New Zealand investors overall are trailing their Australian counterparts, who in turn lag leaders in the EU, a new survey has found.
“Progress has been slow over the past year, but our survey reveals an appetite in the industry to lift its climate game,” said survey co-author and Mindful Money founder and chief executive Barry Coates.
“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.”
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.
The survey's 50 respondents - New Zealand asset owners, fund managers and wealth managers - collectively manage $331bn in assets; equivalent to an estimated 73% of the total assets under management in New Zealand.
Key findings include:
- Most 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.
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.
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.
“Kiwi investors have the opportunity to catch up fast. There are excellent tools and frameworks to help get started … Investors can also accelerate their climate progress by joining the collaborative peer forums that connect to the experts in this fast-moving field.” - IGCC CEO Rebecca Mikula-Wright
Comparison to an 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.
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, released on November 17th, 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.”