Recently, ICMIF member MAS (New Zealand) announced to its members that it was addressing climate change through their investments in the MAS KiwiSaver Scheme and/or MAS Retirement Savings Scheme (known hereafter as “the Schemes”). On 1 June 2023, the mutual transitioned around NZD 650 million of funds under management (FUM) into a new dedicated climate focussed strategy. This strategy increases members’ investment in companies which provide climate solutions. The investment strategy will also reduce members’ exposure to climate risk, and it targets companies that align themselves to the Paris Agreement goals of maintaining global temperature rise well below 2ºC.

Why is MAS doing this?

When the Paris Agreement was signed in 2015, 195 countries including New Zealand agreed to limit global temperature rise to well below 2ºC by 2050. However, MAS believes that progress towards this goal has been slow and not achieved as much as had been hoped so far. Today, on average, international listed companies are producing greenhouse gas emissions at a rate that puts them on track to push global temperatures up to almost 3ºC by the end of the century.

In a communication to its members, MAS said it believes that the risks of this inaction are great, sharing statistics on, for example, fossil fuel air pollution already being responsible for around 8 million deaths per year, and nothing that the negative impacts of climate change continue to grow as the planet gets hotter. Such impacts of the warming include increased heatwaves, flooding, crop failure, disease, biodiversity loss, and human displacement. If unchecked, MAS believes, these forces are likely to cause further increase health inequity in Aotearoa, a challenge that MAS, through the MAS Foundation, says it is committed to addressing.

As a RIAA-certified responsible investor, and steward of its members’ money, MAS says it believes that climate change, alongside other environmental, social, and governance (ESG) factors, is a fundamental driver of long-term risk and return. Climate change presents risks which will not be rewarded while also creating opportunities to invest in companies providing solutions to one of the world’s most pressing challenges.

MAS says the performance of the new climate strategy it has transitioned to reinforces this conviction. The strategy has had higher returns than the market index average over the past five years.

How MAS is responding

MAS transitioned the majority of the Schemes’ international equity portfolio, valued at around NZD 650 million, into a new Paris-aligned climate strategy. Compared to the market index average, this strategy targets:

• a reduction in the greenhouse gas intensity of members’ investments by at least 50%;
• a reduction in members’ exposure to companies facing climate risk; and
• an increase in members’ investment in companies providing climate solutions.

In addition, the strategy aims to reduce the greenhouse gas intensity of your investments by 10% each year (relative to the base date of 01/06/20), while also targeting companies with credible emissions reduction targets.

MAS says, importantly, this strategy does not seek to reduce members’ carbon footprint solely by excluding high-emitting companies. This is essential, as while the bulk of the world’s emissions are produced by the energy, utilities, and materials sectors, these industries are also crucial to the low carbon transition (eg steel is required to construct wind turbines). Members’ investments will instead maintain broad exposure to all sectors (other than those restricted by MAS, such as fossil fuels, weapons, or tobacco) and achieve decarbonisation by selecting higher performing companies within each sector.

Members can play their part

As investors, represented by MAS as the manager of members’ Scheme(s), the members of the mutual can play a role in helping the global economy to decarbonise. Through their investments, MAS members can help mobilise and shift capital away from companies causing climate harm and towards those contributing to climate solutions. And as highlighted by the higher past returns of MAS’ new climate strategy*, investing in this way not only helps members achieve a healthier planet, but healthier returns along the way.

*Performance of the new climate strategy (MSCI ACWI Climate Paris-Aligned) compared to the performance of the market index average (MSCI ACWI) over the past five years to 31 May 2023 as per MSCI data.