New Zealand investors are increasingly signalling awareness of climate-related financial risks, but their investment decisions are still non-committal. A recent survey among 27 major institutional investors managing over NZ$263 billion ($155.2 billion) in assets reveals that while nearly all participants recognize the importance of climate governance, only a fraction are aligning their investments with renewable energy and low-carbon infrastructure.
Furthermore, the survey reveals that 91% of New Zealand investors have board-level awareness of climate risks and strategies. Moreover, 48% have set net zero targets—well above 30% in 2023. This extremely positive and important shift reflects a recognition of the financial imperative of addressing and managing climate risk.
“New Zealand investors clearly understand the financial imperative of managing climate risk.” – Mindful Money CEO Barry Coates
Caution in Climate Investment
In spite of the strong awareness and commitment to established targets, New Zealand investors are still very conservative in their investment decisions. As of now, only 17% are actually using this new flexibility to send money toward renewable energy or low-carbon infrastructure. Only a scant 13% have established public goals for ramping up these investments.
This hesitance underscores the critical need for more robust tools and data. We need more explicit direction in federal policy to promote a deeper culture of sustainable investments. Specifically, two-thirds of these investors engaged in climate-related advocacy or policy advocacy in the last year. Shareholder activism is still a shadow of that borne by their Australian cousins.
The motivation behind the cautious approach appears to be a blend of fiduciary duty and risk management concerns. As they navigate this complex landscape, many investors are responding to the growing expectations from clients and the public regarding climate action.
“Investors are responding to fiduciary duty and risk management, but they’re also hearing the call from clients and the public. The next step is to move from measurement to meaningful investment in the transition.” – IGCC investor practice director Duncan Paterson
Paths to Leadership in Climate Transition
Given the contribution institutional investors can make to the transition to a resilient, low-emissions economy, New Zealand’s institutional investors are uniquely positioned as sector leaders. First, they have invested in governance. This allows them to stay market leaders paving the way and providing solutions as climate risk becomes more prevalent in the evolving competitive landscape.
The bottom line – investors are waking up to the climate crisis and have established clear targets. Few have taken ambitious action or developed proactive strategies to punish companies that do not meet long overdue challenges. This gap is an opportunity to strengthen accountability for parent companies. It’s our job now to make their ambitious climate commitments into real, concrete actions.
Climate change is a major priority for investors. As New Zealand rapidly approaches its climate goals, investors are under increasing scrutiny from public sentiment and regulatory pressure. A notable 74% of New Zealanders expect their fund managers to achieve net zero emissions by 2050, underscoring the urgent need for institutional investors to enhance their commitment to sustainable practices.