New Zealand Super Fund
The NZ Super Fund is a sovereign wealth fund, investing money on behalf of the New Zealand Government to help pay for the increased cost of universal pension entitlements in the future. A long-term, growth-oriented investor, as at 2023 the Fund had around NZ$60 billion (US$43 billion) in assets. The Fund is managed by a Crown entity, the Guardians of New Zealand Superannuation.
Portfolio level – Portfolio decarbonisation reference target
Baseline date: 30 June 2022 – We set our targets relative to our reference portfolio. Therefore, our baseline is the emissions intensity of the Reference Portfolio in the current year.
We will consider introducing a decarbonisation target in the future (our passive equity investments are set up to decarbonise by 10% each year).
Baseline performance: 194.8 Emissions Intensity per $ of firms sales tonnes of CO2e/$USm Sales
Target year: 2025
Target(s): 40% by 2025 emissions Intensity per $ of firms sales tonnes of CO2e/$USm Sales relative to the 2025 CO2e/$USm Sales of the ACWI IMI.
GHG scopes included: Our targets are based on scope 1 and 2 emissions only due to data limitations for our unlisted assets. However, we are looking to include scope 3 emissions over time.
Our investments into Paris Aligned Benchmark indices (33.5% of NAV) already incorporate scope 3 emissions.
Asset classes in scope: Listed equity, direct investments, investment through funds, including real estate and infrastructure. Currently, our market cap approach to accounting approach does not attribute emissions to fixed income. Further, we attribute nil emissions (and revenue) to our strategic tilting program and other market neutral strategies (mainly executed through derivatives), as well as life settlements, natural catastrophe insurance, active collateral, and 5G spectrum. We plan to review our approach to carbon accounting and whether these assets will be covered by our targets, should they have carbon attributed to them.
Methodology/net zero scenarios: We had targets in place prior to signing up to the Paris Aligned Asset Owners Commitment, so rather than setting a new target, we have tested whether our target was sufficiently ambitious. The IPCC Special Report on Global Warming of 1.5oC suggests that real world emissions need to decrease by 50% by 2030. Our targets seek to deliver a 40% reduction 5 years earlier.
Emissions metrics: Our Reference Portfolio had 3.5m tonnes CO2-e scope 1 and 2 emissions and an emissions intensity of 230.7 per tonnes of CO2-e per US$m revenue in 2019. This compares to 2.9m tonnes CO2-e and a carbon intensity of 194.8 per tonnes of CO2-e per US$m revenue in 2022. This means that our targets are more ambitious than the same percentage targets set against a historical benchmark – we would have achieved a 60.6% and a 56.9% respectively against the historic benchmark versus a 49.0% reduction compared to our actual benchmark. We will continue to monitor this and may review our targets if this changes.
Portfolio level – Investment in climate solutions target
Baseline: As we do not have a quantitative target, we do not have a formal baseline but we believe that our unadjusted reference portfolio represents a measure of how we would invest if we did not have a climate change objective.
For the ACWI IMI – 8.3% is invested in low carbon solutions and 5.4% of revenue is green revenue.
Approach: Investing in climate change solutions is one of the four pillars of our Climate Change Investment Strategy and we seek to invest in climate change solutions not just because they play an important role in generating the energy transition but also because we believe they make attractive investments.
We also have a climate search project which explicitly pursues investment in climate solutions. We seek to invest in commercially attractive climate solutions across the whole portfolio.
Our passive equity portfolios invested in Paris-aligned Benchmark portfolios which have explicit green revenue objectives of: (1) doubling Green Revenue exposure; (2) increasing the Green/fossil fuel-based ratio to 4x higher than their parent indices; and overweighting of companies providing climate solutions.
Based on MSCI’s data, 13.4% of our total long equity holdings are invested in low carbon solutions and 7.4% of the revenue of these holdings is green revenue (as defined by MSCI).
We are currently exploring opportunities to deploy capital in carbon credits, reforestation and have recently deployed capital into energy transition and renewable energy investments. On top of that, we have created a Sustainable Transition Opportunity which seeks to invest in technologies which contribute towards a sustainable economy and have deployed into two access points.
We are working through the best way to measure and increase the proportion the fund that is invested in impact investments (including in climate solutions). We will consider whether to set a quantitative target for climate solutions in 2024.
Asset level – Portfolio coverage target
Baseline: We have not yet set an asset level alignment target for our portfolio because metrics are still emerging and because our portfolio is in a state of flux as we transition our reference and passive portfolios to a Paris-Aligned Benchmark indices. We have provided some data on our relative performance below, but this should not be considered a baseline.
Instead, we have taken significant actions to improve the alignment of our underlying assets, such as shifting our passive equity into the Paris-Aligned Benchmark indices and engaging with our private assets.
Approach: 33.5% of our assets (by NAV) are invested in Paris Aligned Benchmark indices. At an individual holding level, 37.1% of our listed equity and long synthetic exposures portfolio have set Science-Based Target initiative approved targets compared to 31% for the ACWI IMI.
We have not yet selected a methodology for assessing the alignment of our private assets but we ask each of them (except those in run-off) to report their carbon footprints and encourage them to set net zero targets. Where we believe we can help a manager or direct asset to improve their climate change strategy, we will work to support them.
Data sources: We have sourced our data on SBTi alignment from MSCI. Percentage holding data is from internal data.
Asset level – Engagement threshold target
Approach: We have voting guidelines on climate change and vote all of our shares in a consistent way. Our default position is to support climate change-related resolutions, which we do unless there is a compelling reason not to. We recall shares that we have lent out to vote on significant climate change issues.
We use Columbia Threadneedle to lead our engagements with the companies within our global equity portfolio.
We are also members of CA100+ and the TPI.
Operational emissions: We have been certified as operationally carbon neutral for the last four years. For the last two years, we have elected to offset our operational carbon emissions plus 20% of the rolling average of the past five years, effectively becoming carbon negative.
Fossil fuel investment: We target an 80% reduction in fossil fuel reserves by 2025 relative to the ACWI IMI. See the Reduce section of our Climate Change Report for further details.
New Zealand Super Fund case studies