Climate Reporting Lags Behind Climate Action

Highlights:

• Investment in Climate Mitigation Lags: New Zealand institutional investors managing over NZ$230 billion show slow progress in targeting climate mitigation investments, with fewer participants in the 2023 survey.
• Limited Climate Strategies: Only 30% of respondents have a strategy for achieving net-zero objectives, while 54% plan to develop one within the next year, highlighting a gap in actionable climate commitments.
• Biodiversity and Deforestation Policies Needed: Less than one-quarter of investors have policies on biodiversity, and only 15% have policies on deforestation, underscoring the need for stronger environmental policies.

A 2023 survey of New Zealand institutional investors, managing over NZ$230 billion in assets, revealed slow progress in climate-focused investments.

Slow Progress in Climate Mitigation Investments

Despite the growing importance of climate mitigation, the survey saw fewer participants than previous years. Conducted from mid-September to December, the survey period coincided with fund managers preparing their first climate-related disclosure (CRD) reports. The State of Net Zero Investment report by the Investor Group on Climate Change (IGCC), Centre for Sustainable Finance, and Mindful Money evaluated how investors are incorporating climate risk into their decision-making and investing in climate opportunities.

Key Findings and Insights

Last year's survey, which included respondents such as the Climate Venture Capital Fund, NZ Super Fund, and BT Funds Management, highlighted the crucial role of investors in driving climate action. Barry Coates, co-CEO of Mindful Money, emphasized that climate reporting should be a foundation for actionable emission reductions rather than just compliance. He expects better progress in future surveys.

Jo Kelly, CEO of the Centre for Sustainable Finance, noted that while there is a focus on climate reporting, specific commitments to reduce financed greenhouse gas emissions are lacking. Only 30% of respondents had a strategy for achieving net-zero objectives, and 54% planned to develop one within the next year. Furthermore, only 8% had assessed their entire portfolio for climate-related physical risks.

The Need for Action

Rebecca Mikula-Wright, CEO of IGCC, highlighted the importance of investor engagement in reducing deforestation and protecting biodiversity to lower greenhouse gas emissions. She noted that while interest in the relationship between nature and investment is growing, less than one-quarter of surveyed investors have policies on biodiversity, and only 15% have policies on deforestation. Mikula-Wright expects accelerated progress in the coming year.

Overall, the survey underscores the need for more robust climate actions from New Zealand investors to match their reporting efforts.

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