Will the Super Fund now follow its own advice and divest from coal?

Whenever we’ve asked the New Zealand Superannuation Fund what they’re doing about climate change, they’ve said they’re waiting for the Mercer report they’d backed to come out. Well it’s now out and it’s unequivocal about the impact of climate change – investing in fossil fuels is objectively bad for your returns.

Mercer has made one of the strongest financial arguments yet for fossil fuel divestment. (They call it ‘portfolio decarbonisation’.)

Climate change, they say, will give rise to investment winners (renewable energy) and losers (fossil fuels). Coal will be the worst hit, falling in value “anywhere between 18% and 74% over the next 35 years, with effects being more pronounced over the coming decade, eroding between 26% and 138% of average annual returns over the next 10 years”.

One graph in the report says it all:


So the big question now is will the Superannuation Fund begin decarbonising its $29 billion portfolio, starting with coal? Norway did a fortnight ago, and theirs is the world’s largest sovereign investment fund.

When we last asked, the Superannuation Fund had $676 million invested in fossil fuels, $140 million of that in high-risk coal. That total amount is around two percent of their total investments, so divestment will barely be noticeable.

Money released from divestment can be invested in climate solutions instead, like renewable energy. Mercer predicts renewables will be a good bet, with “increasing average annual returns of between 6% and 54% over a 35 year time horizon – 4% and 97% over a 10-year period”.

Rarely does the right thing to do align so closely with the thing that makes the most money.

The Minister for Climate Change Issues labelled the Mercer report as “ludicrous” when I questioned him in Parliament yesterday. Let’s hope Adrian Orr, CEO of the Superannuation Fund, sees it differently. He’s investing for our long-term, after all, not just trying to stay in power for three more years.