Fossil fuel investment drops 'but not fast enough'

This article originally featured on Good Returns and was written by Matthew Martin. 

KiwiSaver funds invested in fossil fuel-producing companies fell by $331 million in the six months to the end of March, according to new data released by Mindful Money.

This represents a fall in the proportion of total KiwiSaver funds invested in fossil fuels from 2.54% to 1.80%, down from $1.85 billion to $1.54 billion, but that's not dropping fast enough, according to Mindful Money founder Barry Coates.

"$1.5 billion of KiwiSaver funds are still invested in an industry that causes climate chaos and provides returns far below the market average," he says.

“The sharp fall in fossil fuel investment by KiwiSaver funds is good news.

"However, there are still too many funds investing their clients’ funds into fossil fuel companies. It makes no sense during a climate emergency, but it also makes no sense financially."

Coates says some funds monitored by his ethical investment charity have increased their investment in fossil fuels when data shows the US Oil and Gas index has dropped by 74% over the past seven years, compared to a rise in the S&P500 index of over 200%.

"There have been repeated warnings over stranded assets and other climate risks to fossil fuel companies [and] most fund managers have consistently failed to factor the financial risks of climate change into their investment decisions,” he says.

Mindful Money's latest annual survey shows that three-quarters of New Zealanders want to avoid investing in fossil fuel companies.

"The result is that individual investors have not only had their funds invested in the fossil fuel sector against their wishes, but also lost money in doing so. This has not been smart investing.”

Decreasing investment in fossil fuels is an effective lever for reducing carbon emissions but only 2% of KiwiSaver funds were divested from fossil fuel companies in 2018.

Coates says the good news is fund managers are waking up and now 15% of KiwiSaver funds have a policy to exclude fossil fuels.

He says there are concerns some fund managers continue to invest in fossil fuel companies because they say they are engaging those companies and influencing them to transition to renewable energy.

"However, few provide any evidence of how they are exercising that influence and what changes are being achieved.

"The reality is that, with a few exceptions, the major fossil fuel companies have consistently tried to undermine regulation and have made little progress towards the transition to clean energy."

According to CPD Global, the world’s 24 oil majors spent only 1.3% of their capital expenditure on renewable energy in 2018.

"Their rhetoric about a climate transition is not matched by their investments," says Coates.

He says New Zealand fund managers are starting to take climate change seriously, but the data shows most investment fund providers are still failing to take the wider impacts of their investments into account.

"They need to read the science, understand the climate risk, listen to their investors and take action on climate change.”

KiwiSaver funds excluding fossil fuels can be found here.