Sustainability Pathways

A monthly newsletter

Welcome to ISSUE 2 of Sustainability Pathways,

An asset owner switching indexes can involve billions of dollars of assets, multiple layers of stakeholders and numerous implications for portfolios and the real economy. So what’s the upside?

In this month’s newsletter, we share insight on NZ Super Fund’s decision to transfer its entire passive equity program to MSCI Climate Paris Aligned Indexes.

Protecting returns: Are carbon risks priced into the market?

NZ Super Fund began its net-zero journey in 2007, when it became a member of CDP, a not-for-profit that helps companies and countries measure and manage environmental risks.

The sovereign wealth fund then established an internal team to start looking at investment risks and opportunities directly arising from climate change. It found that the market underprices carbon risks.

Since a core pillar of NZ Super’s mandate is to maximize returns without undue risk, fund managers set out to reduce their carbon-related exposures.

Aligning with the Paris Agreement, the international climate change treaty, subsequently became a core goal. Key to this strategy was shifting the passive equity segment of the fund’s portfolio, which represents some 40% of its roughly NZ$61 billion ($38.4 billion) in asset holdings, to Paris Aligned indexes.

The index suite is designed to minimize exposure to physical and transition risks associated with climate change. It also aims to boost exposure to sustainable investment opportunities, capturing positive returns related to clean technologies, capital expenditures or green bonds.

Watch the webinar, Putting Climate Ambition into Practice for more insight from Rishab Sethi, NZ Super Fund’s Director of External Investments & Partnerships.

Capital for Climate Action Conference
APAC Stream | May 17 (virtual)

What might a world of 3°C warming mean for Asia-Pacific?

To hear about this and other topics, such as how investors can support net-zero transitions, join MSCI’s Capital for Climate Action Conference on May 16 and 17.

How can asset owners help finance the transition to net-zero economies?