Accident Compensation Corporation
Portfolio level – Portfolio decarbonisation reference target
Baseline date: 30 June 2019
Baseline performance: 562 tCO2e/$USDm revenue
Target year(s): 2025, 2030 and 2050
-60% CO2e/$USDm invested by 2025
-65% CO2e/$USDm invested by 2030
Net zero emissions by 2050
GHG scopes included: Our target carbon intensity metric includes scope 1 and 2 emissions across all sectors and estimated downstream scope 3 emissions relating to the carbon embodied in the reported fossil fuel production volumes of energy and mining companies that own fossil fuel reserves. Fossil fuels are defined as oil, gas and thermal coal, the combustion of which is the largest single source of global greenhouse gas emissions. Other scope 3 emissions have not been included to date because we believe the comparability, coverage, transparency, and reliability of scope 3 data still varies considerably across companies and that this could distort progress towards meeting decarbonisation targets. We will look to phase in the measurement of scope 3 emissions for other priority sectors according to the guidance of PCAF.
Asset classes in scope: Listed equity. (Our current approach includes all company emissions in our carbon intensity measure for listed equity, i.e all emissions are allocated to equity, rather than allocating them across equity and bond holdings). We are developing our approach to other asset classes.
Net zero scenarios/methodology: The emission reduction trajectory guided by our interim targets align with the UN Intergovernmental Panel on Climate Change (IPCC) 1.5 degree
scenario with no or limited overshoot.
Emissions metrics: Aligning our portfolio with a 1.5 degree scenario requires a reduction in the emissions of our investee companies in line with a net zero emissions world. All else equal, this implies carbon reductions per unit of output, or sales, in line with net zero emissions. When appropriate, our stewardship and voting will continue to encourage real world emission reductions in line with our targets. We target reductions in carbon intensity because portfolio deposits and withdrawals can limit the comparability of absolute emissions through time. Carbon intensity metrics capture the improvement in carbon efficiency, regardless of fund size.
Portfolio level – Investment in climate solutions target
Qualitative goal: In December 2021, ACC established a climate change fund dedicated to seeking commercial opportunities in climate change solutions. The fund allocation was initially set at $NZD50mn, with a view to increasing this allocation according to the availability of commercial opportunities.
Methodology: We do not have a quantitative target so do not have baseline. However, our dedicated search for commercial opportunities in climate solutions started in December 2021. We will continue to do work to determine a methodology to assess climate solution investments and continue to seek commercial opportunities in climate solutions.
Asset level – Portfolio coverage target
Approach: We have not set a quantitative baseline or target but monitor progress as we progress toward net zero. As of 30 June 2022, 27% of listed equities (by market value) had an SBTi approved target. A further 48% were either committed to an SBTi target or were aimed at aligning with the Paris Agreement according to MSCI’s Implied Temperature Rise methodology.
We will also explore the approach to the baseline assessment of asset alignment according to the Net Zero Investment Framework and explore setting targets in due course.
Data sources: Our current alignment data is sourced from MSCI
Asset level – Engagement threshold target
Approach: All global portfolio managers are asked to consider our ethical policy, including our net zero alignment, in their voting.
Our domestic internal portfolio managers also actively engage on priority ESG matters, including climate change.
We use the Columbia Threadneedle to lead our engagements with the companies within our global equity portfolio.
At the moment, 100 per cent of our global corporate bonds portfolio are managed by members of climate action 100+, and almost 20% of our global equity portfolio. We will consider how best to establish the proportion of financed emissions in material sectors that are subject to direct or collective climate engagement actions and will continue to work with managers to assess climate engagement and outcomes.
Methodology: An annual decline in Carbon emissions of at least 7% per annum emissions aligns with the IPCC 1.5 degree scenario (with no or limited overshoot). It is also consistent with the European Technical Expert Group on Climate Change’s requirement to cut year-on-year carbon emissions by 7%. Our current targets are consistent with the expected reductions in carbon emissions.
Operational emissions: ACC has committed to net zero operational emissions by 2025 in line with the NZ’s Carbon Neutral Government policy.
Fossil fuel investment: We do not invest in companies earning more than 30% of their revenue from thermal coal.
We plan to include further information on planned actions, governance, strategy, and progress to achieve climate targets in our next Annual Report, and through PRI reporting mid-next year. Our TCFD report will be available in the ACC 2022 Annual Report, which will be available on our website October 2022: www.acc.co.nz