MAS helping you address climate change with $650 million investment

MAS is helping you address climate change through your investment in the MAS KiwiSaver Scheme and/or MAS Retirement Savings Scheme (the Schemes). On 1 June 2023, we transitioned around $650 million of funds under management (FUM) into a new dedicated climate focussed strategy. The strategy is designed to increase your investment in companies providing climate solutions, reduce your exposure to climate risk, and target 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, progress towards this goal has been limited. 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.  

The risks of this inaction are great. Fossil fuel air pollution is already responsible for around 8 million deaths per year, while the negative impacts of climate change continue to grow as the planet warms. Such impacts include increased heatwaves, flooding, crop failure, disease, biodiversity loss, and human displacement. If unchecked, these forces will likely conspire to further increase health inequity in Aotearoa, a challenge that MAS, through the MAS Foundation, is committed to addressing. 

As a RIAA-certified responsible investor, and steward of your money, we believe 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. 

The new climate strategy we have transitioned to reinforces this conviction. The strategy has had higher returns than the market index average over the past 5 years*.

How MAS is responding  

We transitioned the majority of the Schemes’ international equity portfolio, valued at around $650 million, into a new Paris-aligned climate strategy. Compared to the market index average¹, this strategy targets: 

• a reduction in the greenhouse gas intensity of your investments by at least 50%²;
• a reduction in your exposure to companies facing climate risk³; and
• an increase in your investment in companies providing climate solutions⁴.
  
  

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 targets⁵.

Importantly, this strategy does not seek to reduce your 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 (e.g. steel is required to construct wind turbines). Your investments will instead maintain broad exposure to all sectors (other than those we restrict, such as fossil fuels, weapons, or tobacco) and achieve decarbonisation by selecting higher performing companies within each sector.

Playing your part 

As an investor, represented by us as the manager of your Scheme(s), you can play a role in helping the global economy to decarbonise. Through your investments, you 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 our new climate strategy*, investing in this way not only helps you achieve a healthier planet, but healthier returns along the way. 

This article was edited on 11/10/2023 to clarify the non-financial outcomes of the new climate related strategy.

*Performance of the new climate strategy as represented by MSCI ACWI Climate Paris-Aligned Index compared to the performance of the market index average (MSCI ACWI) over the past 5 years to 31 May 2023 as per MSCI data. Please note performance may differ from MSCI data shown due to the application of the MAS Responsible Investment Policy, which incorporates additional factors such as weapons, tobacco and fossil fuel exclusions. Learn more here.

¹ As represented by the MSCI All Country World Index (MSCI ACWI).

² The investment strategy aims to achieve a 50% minimum reduction in greenhouse gas (GHG) intensity (scopes 1-3) relative to the MSCI ACWI Index. 

³ The investment strategy aims to achieve a 50% minimum reduction in the weighted average potential emissions intensity relative to MSCI ACWI Index and a 50% minimum reduction in the weighted average extreme weather climate value-at-risk (aggressive scenario) relative to the MSCI ACWI Index. 

⁴ The investment strategy aims to achieve a 100% minimum increase in weighted average green revenues relative to the MSCI ACWI Index.

⁵ The investment strategy aims to achieve a 20% minimum increase in the aggregate weight of companies setting targets relative to the aggregate weight of such companies in the eligible universe.