Should Pensions Invest Against Climate Change?

Draft bill would require New Zealand Superannuation to consider global warming.

March 28, 2012

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1342537_namibia_-_namib_desert_-_dead_vleiSovereign Wealth Fund expert, Ashby Monk, shared an interesting link on his blog this morning. He’s pointed out a draft Member’s Bill that has been introduced in New Zealand parliament. It would require fund managers of the New Zealand Superannuation Fund to consider the implications of their investment decisions on climate change. As the Bill states:

The New Zealand Superannuation Fund (the Fund) is an investment in our future. The Fund’s present governance structure gives no directives on investment in companies whose activities are presently undermining our future.

The bill goes on to point out that the Fund has $43 million invested in Exxon Mobil, a company it describes as “one of the major underwriters of the climate change denial industry.”

It’s proposed that the Fund add environmental sustainability and impacts on climate change to the directives its guardians must consider when making their investment decisions. The authors of the bill also point out that investing in companies like Exxon is inconsistent with the UN’s Principles for Responsible Investment.

What’s interesting about the bill is that it pits politics against fiduciary duty – a situation that isn’t entirely new in the public pension space, but one that could become increasingly complicated as key policy issues like climate change become more prominent in the years ahead.

I’d welcome your thoughts on the bill — do you think it’s a fair proposal? Or should fiduciaries be left to make these judgements on their own based on their main goal, making money for the plan’s beneficiaries?

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