By Nick Hedley
New Zealand’s Accident Compensation Corporation (ACC), which
provides insurance coverage for accidents in the country and manages NZ$49
billion (US$28 billion) in assets, is shifting almost its entire allocation
towards listed equities to low-carbon benchmarks.
The move is aimed at ensuring the fund remains on track to
reach “ambitious emission reduction targets,” ACC said in a statement. The
changes cover about NZ$15 billion (US$8.5 billion) of equity investments across
ACC’s global, Australian and New Zealand portfolios.
The fund adopted lower carbon benchmarks for its New Zealand
equities portfolio in May and is now moving to similar benchmarks for
international equities. Most of ACC’s listed equities are outside of New
Zealand, and they make up the largest part of its measured emissions.
It is adopting the MSCI ACWI Low Carbon Target Index as its
global equities benchmark. The index’s carbon intensity is 90% lower than the
fund’s existing benchmark, the MSCI All County World Index, “but otherwise has
similar investment characteristics.”
For its Australian equities portfolio, the fund will adopt
the S&P/ASX 100 Bank & Low Carbon Adjusted Total Return Index and the
S&P/ASX Small Cap Ordinaries Accumulation & Low Carbon Adjusted Index.
“ACC is committed to supporting the government in achieving
carbon reduction objectives and showing leadership on climate change,” Chief Investment
Officer Paul Dyer said. “Asset owners have a responsibility to support the
transition to a low-carbon economy through investment decisions and
interactions with investee companies.”
ACC said it had already slashed the carbon intensity of its listed
equities portfolio nearly 50% from the 2019 baseline level. The new benchmarks would
help it meet interim targets for a 60% reduction in the fund’s carbon intensity
by 2025, and 65% by 2030.
In addition to adopting low carbon benchmarks, ACC said it
would impose portfolio carbon limits, which would be reviewed annually.
“We believe divestment and exclusion can only be part of the
answer,” the fund said. “Engagement is becoming increasingly important because
companies are more likely to raise their climate ambitions if held to account
by responsible investors such as ACC, rather than being owned and controlled by
less climate conscious shareholders.
“Ultimately, net zero will only be achieved if all of us –
governments, companies, investors, and the public – participate in the
transition to a low-carbon world.”
Related articles:
NZ Super Fund Allocates US$15 billion Towards Low-Carbon Indices
Timber and Hedge Fund Allocations Shine for New Zealand’s Sovereign Wealth Fund
BlackRock Real Assets Buys New Zealand’s solarZero in APAC Clean Energy Push