Tuesday, June 15, 2021
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HomePoliticalDefault KiwiSaver Schemes Will No Longer Include Investments In Fossil Fuel Production,...

Default KiwiSaver Schemes Will No Longer Include Investments In Fossil Fuel Production, The Government Announced Today



The news is part of a suite of changes
made to KiwiSaver default provider schemes
. The new
arrangements will take
effect on 1 December 2021
.

The SMC asked experts
to comment on the news.

Ivan Diaz-Rainey, Director,
Climate and Energy Finance Group (CEFgroup), University of
Otago, comments:

“Today’s announcement that
KiwiSaver default funds will exclude any investments in
fossil fuel production is welcome news. The announcement is
another step in the process of greening the New Zealand
financial system and the economy more generally. There is a
sense that Treasury is finally putting serious weight behind
the climate change agenda. It follows soon after a
disclosure that some Budget
2021 budget bids will account for climate costs with a
shadow carbon price
and the announcement late last year
that all large
financial institutions will need to report on climate risks
by 2023
. Cumulatively, it starts to feel like there is
some real teeth to environmental policy
finally.

“Some may quip about the materiality of
this announcement. In terms of domestic investments, I
don’t think this is going to make a huge difference to
many firms on the NZX, save for a few firms such a New
Zealand Oil and Gas. However, a fair chunk of KiwiSaver
investments are invested overseas, and in this context, it
will means excluding large oil and gas firms such as
Exxon.

“No doubt prior pressure from individuals
meant that few default funds held such positions, but it now
gives investors certainty that it will not be the case. More
importantly, I believe this will also protect New Zealand
investors as there is now unprecedented momentum globally
behind energy transition and this is ultimately going to be
very bad news for companies in the fossil fuel sector. The
Biden administration is being bold on climate investment and
targets, meaning the three largest economies in the world
– the EU, the US and China – are going hard at
decarbonisation and sustainable investing. The announcement,
therefore, stops Kiwis being dumped with fossil fuel stocks
that have poor long-term prospects.”

No conflict
of interest.

Dr David Hall, Senior Lecturer,
School of Social Sciences and Public Policy, Auckland
University of Technology, comments:

“The New
Zealand Government’s decision to exclude fossil fuel
investments from Kiwisaver schemes is prudent, warranted and
consistent with international trends.

“In order to
limit global warming in line with the Paris Agreement, a
large proportion of existing fossil fuel reserves must
remain unused as ‘stranded assets’. This will involve a
vast forfeiture of long-term investments; according to one
study
, potentially a write-off of between $1 trillion
and $4 trillion in fossil fuel assets
alone.

“Divesting retirement savings out of fossil
fuel investments reduces New Zealanders’ exposure to the
risk of such losses. It increases the cost of capital for
fossil fuel companies, which need to work harder to find and
retain investors. Finally, fossil fuel divestment frees up
capital for investing in low-emissions assets whose future
is assured by the material realities of climate
change.

“Organisations such as the UN-convened Net-Zero
Asset Owner Alliance
, a network of over 30 investors
with more than USD$5 trillion in assets under management,
will advance this agenda at COP26 in Glasgow. These are
systems-level changes that tilt our economies toward making
the low-emissions transition sooner rather than
later.”

Conflict of interest statement: “ANZ is
a Principal Partner of the Climate Innovation Lab, a climate
finance project for which I am Founding
Director.”

© Scoop Media

 



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