The New Zealand Superannuation Fund says it will devise a set of rules to assess investment winners and losers under climate change, a strategy that could rule out fossil fuels or producers such as current portfolio member Exxon Mobil.
Guardians of the Fund chief executive Adrian Orr was at pains not to name names.
The strategy didn't mean NZ Super would avoid sectors per se but would assess investments on a case by case basis to see whether they needed to be risk-weighted for the effects of climate change.
Still, there were difficult choices ahead for some of the world's biggest companies, Orr said. "Some of the largest multinationals are fossil fuel driven. They need to be thinking very hard about what they are doing with retained earnings."
"Economics is one of the ultimate expressions of the consumer and society's wants and needs," Orr told BusinessDesk. "Some assets we invest in today may become uneconomic, made obsolete or face a dwindling market."
Its largest offshore equity holdings are Apple, at just 0.6 percent of the fund, followed by Alphabet, Microsoft and Exxon. Metlifecare was its biggest New Zealand exposure at 0.8 percent, followed by Fisher & Paykel Healthcare and Auckland International Airport. The top 10 include Meridian Energy, Contact Energy and Z Energy.
As at June 30, 2015, 7 percent of its equity portfolio had fossil fuel reserves while across all its investments, 5 percent by market cap had reserves.
Orr said within fossil fuels, NZ Super could improve the environmental footprint of its portfolio by moving down the emissions scale, such as migrating away from coal and oil in favour of natural gas.