By Nick Hedley
The state-owned New Zealand Superannuation Fund has shifted
about 40% of its overall investment portfolio into indices aligned to global
effort to tackle climate change, it says.
It has effectively allocated NZ$25 billion (US$15 billion)
of its passive index-tracking reference portfolio towards sustainable
strategies, and says detailed forecasts show the move is unlikely to weigh on
investment returns. The fund’s total portfolio is worth NZ$57.3 billion
(US$34.4 billion).
Whereas the fund previously tracked a custom version of the
MSCI All Country World Investible Market Total Return Index, it now tracks the
MSCI World Climate Paris Aligned Index and the MSCI Emerging Markets Climate
Paris Aligned Index.
The reallocation started in June and is largely complete, NZ
Super Fund said in a statement.
“In addition to alignment with climate goals, we expect
these new indices to deliver better environmental, social and governance (ESG)
metrics across the board,” chief investment officer Stephen Gilmore said in a
statement.
The changes mean NZ Super Fund has reduced the number of
publicly listed companies that it owns directly, although this would bring
efficiency gains, Gilmore said.
“A smaller, more concentrated portfolio will be cheaper to
run, and more manageable for us when looking to identify and engage on
responsible investment issues.”
The fund has been trimming its exposure to carbon emissions
since 2017 and says it has reduced total portfolio emissions intensity by
nearly 50%. It no longer holds any material, long-term exposure to fossil fuel
reserves.
Nevertheless, it says it continues to outperform.
Earlier this year, a study by Global SWF found that NZ Super
Fund, with an 11.8% return per annum over the past six years, was the top
performing sovereign wealth fund globally.
The fund, which was established by the New Zealand government
to help pre-fund universal superannuation, has returned 10% a year since
inception in 2003.
It recently reported that its portfolio shrank 7% to NZ$55.7
billion (US$33.4 billion) in the year to end-June as its passively managed
reference portfolio, which makes up 60% of the fund and is heavily weighted
towards equities, declined 14.2%.
On the other hand, its actively managed portfolio
outperformed, thanks in part to allocations towards timber and hedge funds.