Waikato Regional Council has voted in favour of a new Responsible Investment Policy that includes a Climate Change Investment Policy and a commitment to divest from coal, oil, and gas companies. This is a win for both the climate and ratepayers as higher investment returns are anticipated from environmentally sustainable funds.

The Regional Council has over $100 million in investments which are used to fund regional development grants and provide rate relief. I am delighted that from now on the Council’s investment policy will ensure that its investments have a positive climate change outcome and will no longer include financial support for the fossil fuel industry.  Responsible investment policies have resulted in higher returns, so this is a win for both the climate and for ratepayers.

Having a climate-friendly responsible investment policy was one of several significant climate actions outlined in the Climate Action Roadmap discussion document which was adopted by Council in 2020.  It’s fantastic that Council has now resolved to adopt a specific investment policy which locks in one of the Roadmap’s high-level recommendations.

Waikato Regional Council now joins other councils such as Auckland, Dunedin and Christchurch which have committed to fossil fuel divestment policies.  We have also joined a global fossil fuel divestment movement.  Over 1325 institutions, with US$14.56 trillion have now committed to policies blacklisting coal oil and gas companies.

A review by Morningstar found that environmentally sustainable funds outperformed traditional funds across the board – beating them during the pandemic as well as during the 10 years up to and including the coronavirus sell-off.

I wish to acknowledge the support and encouragement from 350 Aotearoa and Go Eco.  Representatives from those groups delivered a petition supported by 1000 people to the Council and presented it to the Finances and Services Committee calling for the Council to divest from fossil fuels.

Climate Change Investment Strategy

At a Council workshop I recommended that the Council adopt a similar climate change investment strategy to the New Zealand Super Fund.  I am delighted that Council has agreed to adopt this strategy.

The Council’s Climate Change Investment Strategy has four elements: Reduce, Analyse, Engage and Search.

The Reduce element involves measuring our carbon footprint and targeting a reduced exposure to carbon through active divestment from fossil fuels and other relevant portfolio exposures. Regular monitoring will be carried out on the portfolio, to assess the carbon intensity of the portfolio and its resilience to climate change.

The Analyse element integrates climate change considerations into the investment framework across the portfolio.

The Engage element involves us working with the Fund’s investment managers to help them actively consider climate change in their strategies, encouraging voting to support climate change initiatives within listed holdings.

The Search element involves actively looking for investments that will benefit from a changing climate or the transition to a low carbon energy system

Responsible Investment Exclusions Policy

Exclusions are implemented in sectors and companies that are known to do substantial and irreparable harm to society or the environment. In determining whether to exclude any investment on this basis, the Council will consider:

• Whether excluding the investment supports our values and beliefs

• Whether New Zealand legislation, regulation or government commitments prohibit the product or activity or aim to severely curtail or make obsolete such products or activities in the foreseeable future

• The impact of the exclusion or ongoing investment on the expected investment risk and return of the investment portfolio

• The impact of exclusion or ongoing investment on the reputation of the Council

• The efficacy of other responsible investment approaches (e.g. engagement, either individually or collaboratively) in addressing the issue of concern.

As of July 2021, the Council has determined that the following activities should be excluded on this basis:

Controversial Weapons:  Companies that manufacture whole weapons systems, or delivery platforms, or components that were developed or are significantly modified for exclusive use in cluster munitions, anti-personnel landmines, chemical, biological or nuclear weapons, as well as companies involved in the production and retailing of automatic and semiautomatic civilian firearms.

Tobacco: Companies involved in the manufacture and/or production of tobacco products (regardless of revenue), including subsidiaries and joint ventures, as well as any other company that derives 10% or more of revenue from other tobacco related business activities such as packaging, distribution and retail of tobacco products.

Fossil Fuels: Companies with significant coal, crude oil and natural gas reserves as well as companies deriving more than 10% from the extraction, refinement or distribution of fossil fuels. Investment in biofuels and other forms of renewable energy are not affected by this exclusion.

Companies deriving more than 10% of revenue from: Adult entertainment Alcohol (recreational) Gambling

The Council may consider additional products or services for exclusion in future against this policy framework.