Questions, no Government answers on KiwiSaver fossil fuels ban

The ban on default Kiwisaver accounts investing in fossil fuels that was announced yesterday remains vague, with the Government making unsupported claims and saying they will provide details later.

So it looks more like yesterday was more campaign PR exercise than solid plan.

I wonder if the Green Party are hoping that the details can wait until after this year’s election – and hoping they don’t have to worry about being vetoed by NZ First. Notably their were three Ministers involved in the announcement, Kris Faafoi and Grant Robertson (both Labour) and James Shaw (Greens). The elephant wasn’t in that room, but is trying to get re-elected in a pivotal role.

Newsroom asks more than Three questions about the KiwiSaver fossil fuels ban

The reason the Government is making its announcement now is the terms of the nine existing default providers expire in June 2021, and the newly-announced rules will apply to anyone wanting to run a default fund after that.

So the actual rules may not be clear until next year.

A vague claim in the Beehive promotion of the policy seems misleading: “In 2017, the $47 billion NZ Superannuation Fund adopted a climate change investment strategy that resulted in it removing more than $3 billion worth of stocks that exceed thresholds for either emissions intensity or fossil fuel reserves, without negatively affecting performance. So we know that moving away from investments in fossil fuels doesn’t have to mean lower returns.”

Newsroom:

Perhaps the highest-profile model – and the one quoted in the Government’s release – is the NZ Super Fund. But that fund, while putting considerable store on its Climate Change Investment Strategy and its carbon exclusion methodology, is proudly not fossil fuel-free.

…what the announcement doesn’t mention is the Super Fund has kept the top performing emitters in its portfolio. “Stocks in the top quartile of the “Carbon Emissions” score – reflecting less risk due to better management than their peers with respect to climate issues – have been retained in the portfolio,” Super Fund spokesman Conor Roberts says.

So this sounds like prudent investing – getting out of risky fossil fuel companies but keeping investments in “top performing emitters”.

Question 1: How do you define investment in fossil fuels production? Which companies fall into the category of banned investments?

Some are pretty straightforward. Oil companies Shell, BP and Exxon Mobil are presumably out. But what about NZ petrol distributor and retailer Z Energy?

What about ANZ, BNZ or Westpac, with their huge loans to Australian mining companies? As one commentator put it to Newsroom: “A decent whack of KiwiSaver funds are going to Australia and if you are investing in Australian banks you are knee deep in fossil fuels.”

Then there are the huge international funds. Warren Buffett’s mega-fund management company Berkshire Hathaway has an energy division that owns a number of coal-fired power stations

What about companies that are huge users of (and therefore encouragers of) fossil fuels production? Toyota or Volkswagen, the world’s largest producers of fossil fuel-driven cars; Fonterra, whose coal-fired milk processing plants make it one of the country’s top CO2 emitters; Air NZ, whose search for alternative fuel sources hasn’t come to much so far.

That’s a question I have already asked. It’s an important one that hasn’t come close to being answered yet.

There’s no definition of “fossil fuel production” in the Government’s press release. There’s also no information on whether the Government is going to give default KiwiSaver providers guidance on what exactly it means by “excluding investment in fossil fuels”.

When Newsroom asked  Kris Faafoi’s office for clarification, spokesman Peter Stevens told us only: “The Government will provide more detail on the threshold and definition of the exclusion before calling for tenders, as part of the process to appoint new KiwiSaver default providers.”

That sounds like next year, after the election.

As one KiwiSaver provider, who didn’t want to be named, told Newsroom. “Is the Government deliberately leaving it open, or are they going to come back later and tell providers they actually had a more specific idea how this is going to be interpreted?”

It’s not even clear whether it will be defined by the Government.

Question 2: What evidence does the Government have that its fossil fuels-free strategy won’t harm the financial performance of New Zealanders’ retirement savings?

Faafoi: ““It also makes sense for the funds themselves given that there is a risk of investing in stranded assets as the world moves to reduce emissions.”

And: “So we know moving away from investments in fossil fuels doesn’t have to mean lower returns.”

Which is only vaguely reassuring, particularly given the fact the Super Fund made a calculated decision not to get out of fossil fuels entirely – see above.

The Government appears to be assuming that it knows better than KiwiSaver fund managers what investment strategy is right for their fund in terms of risks and returns.

Which coincides with their climate change mitigation ideals.

“I’m not convinced government should be the arbiter on where the best returns can be generated in a portfolio,” one KiwiSaver manager told Newsroom. “If the objective of KiwiSaver is to make as much return for investors as possible, then fund manager should have freedom where they invest.”

But what would they know about investing, especially compared to politicians who have experience in investing in their own interests.

Question 3: Isn’t shareholder activism one way to produce positive change? But that means you have to be a shareholder.

…these days there’s another argument increasingly being heard in the investment community.

Why investing in coal mines could (maybe) be ‘responsible investment’.

Berridge argued that investors, particularly large ones, should be engaging actively and openly with companies whose products, activities or business models they are concerned about.

“If you are an investor in a ‘bad’ company and you vote for change, you have a chance to make a difference,” Berridge told me. “But if you invest just in ‘good’ companies, there is an argument your vote makes no difference.

“For an individual looking at a KiwiSaver fund, for example, there is an argument that choosing a provider or a fund which feels good is not helping things. It’s the weakest method of trying to make a difference.”

The move by the New Zealand Government to ban investments in fossil fuel companies risks being counterproductive, another KiwiSaver manager told Newsroom.

“There is a real danger we are shooting ourselves in the foot here. If our voices aren’t heard at the board table there’s a risk that progress towards emissions reduction goals could be slower.”

Maybe the Government is planning on forcing companies to change so shareholders won’t have to. Again that’s  questionable interference by the Government.

Waters are muddied still further by the fact that some companies that are heavy producers or users of fossil fuels are also putting a lot of money into trying to move towards renewable energy. Majority Finnish government-owned oil company Neste is also one of the largest producers of renewable diesel in the world.

Companies heavily involved in fossil fuels have plenty of incentive to diversify into clean energy alternatives to position themselves well for the future. If they lose investors they may be less able to do that.

With the lack of details yesterday’s announcement was more of a Labour-Green PR exercise than a definitive plan. They will probably use it in their campaigning this year. We re unlikely to know what their new investment rules will actually mean for people who invest via Kiwisaver.

 

 

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17 Comments

  1. Duke

     /  2nd March 2020

    Thats an easy answer . Companies that are primary exploration or producers of fossil fuels. Anadarko Tick . Shell Tick BHP tick ( they still are in coal and oil )
    Clearly oil production and exploration and coal exploration or production.
    Its a silly option , but they are over thinking the consequences .
    Fossil Fuel means what its says. Volkswagen doesnt produce fossil fuels.

    Reply
    • What about companies that invest in ‘fossil fuel’ companies, like banks? What about companies who use banks?

      Reply
      • artcroft

         /  2nd March 2020

        What about agricultural supplies companies who use fossil fuels to produce ammonia for plant fertilization. Should we all just stave. (I’m sure the Greens could identify the groups who need killing first – the left is great at creating termination lists)

        Reply
      • Duker

         /  2nd March 2020

        Like I said , overthinking it .
        Banks dont produce fossil fuels …surely you think they should be included , and if you dont why make a thing about it.
        Like to see all the people who think this nonsense about fossil fuels first stop using them completely. Thats a direct use, dont have to worry about the trucks taking food to supermarkets which you then buy..
        Arty doesnt seem to have heard of Hilter or Franco or Pinochet or any other right wing dictators who used mass killings of their enemies

        Reply
        • David

           /  2nd March 2020

          Trouble is Duker once again you haven’t thought at all and just attacked a fellow commentator in a pretty awful fashion.
          Pete’s post is thought provoking and interesting and shouldn’t just be summarily dismissed by you.

          Reply
          • Duker

             /  2nd March 2020

            Its called in the media world ‘ a beatup’….. a slow news day, when did some old fashioned virtue signalling have to be like the Roman Catholic catechism.

            By all means say what it is, a bit of Greenwashing.

            “Media beat-ups are sensationalised stories that greatly exaggerate or misrepresent the significance of otherwise unremarkable events or issues.”

            Reply
            • artcroft

               /  2nd March 2020

              The problem i have with it is that fossil fuels under pin our entire civilisation, not just the economy but the entire civilisation. Its not a trivial aspect that can be toyed with as Labour are doing. Sure there are problems that need to be addressed but it requires profound thinking, sacrifice and leadership. Labour and the Greens offer none of these.

              Instead we get the equivalent of an Apple announcement that they are getting out of the phone business. WTF? That is your business. If so, what’s Tim Cook’s new idea? TBA….

              Its political BS to pander to a group of Green dimwits.

            • Duker

               /  2nd March 2020

              I agree completely with that. And it deserves all the criticism it gets for that.

              But what Newshub and PG has pandered too is a form of concern trolling…..they cant say outright what nonsense as that would mean they too dont believe the climate hysteria.
              Instead they try to find fault with …the wording.!

              I just looked at the Beehive press release …you know checking original sources and such and this is the ‘clear as a bell statement’

              “Rule changes mean that investments in fossil fuel production will be excluded from future funds that are default providers…”
              https://www.beehive.govt.nz/release/default-kiwisaver-changes-support-more-responsible-investment

              No need to concern troll about banks or car companies or anything else . -Fossil Fuel production …end of story.
              meanwhile the concern trollers will happily pay lip service to the CO2 hysteria and buy and use fossil fuels like they always have.

            • It was Newsroom, not Newshub. You would have noticed that if you had read the source rather than relying on Beehive PR.

              Funny to see you accusing me of being a concern troller. Did you notice I actually wrote the post? ‘Trolls’ react in various ways to posts. You should be familiar with that.

              If the Government makes announcements that lack essential details they leave themselves open to questions being asked.

            • Duker

               /  2nd March 2020

              Newshub instead of Newsroom was just a typo.
              90% of the story is a cut and paste from Newsroom, nothing wrong with that , except you havent critically checked the basic premise –
              PG “So the actual rules may not be clear until next year.”

              The beehive statement makes it totally clear – Fossil Fuel PRODUCERS. The dictionary definition doesnt include car company’s or banks

              As for the rest of the details that arent clear to you and it covers far more than fossil fuels the big one is the shift of default funds from conservative to growth
              heres the list:
              #changing the investment mandate from ‘conservative’ to a ‘balanced’ fund
              #ensuring KiwiSaver fees are simple and transparent, and using the procurement process to put pressure on fees
              #obligations on default providers to engage with their members to help them make informed decisions about their retirement savings
              #excluding investments in fossil fuels and illegal weapons. While default fund providers have in recent years divested any investments in companies involved in illegal weapons like cluster munitions and anti-personnel landmines, the changes now enshrine that requirement in default fund settings
              #requiring default providers to maintain a responsible investment policy that’s published on their website
              #transferring non-active default members[1] of any provider that is not reappointed to one of the appointed default providers[2] (so that these members retain the benefits of being in a default fund).

              So unless you run a KS fund , Im sure thats ‘detail enough’

              Like I said Newsroom story is a classic case of diversion and concern trolling because its against their editorial line to really knock anything about silly CO2 posturing

            • The Newsroom article is a classic case of seeking clarification from the Government…

              When Newsroom asked Kris Faafoi’s office for clarification, spokesman Peter Stevens told us only: “The Government will provide more detail on the threshold and definition of the exclusion before calling for tenders, as part of the process to appoint new KiwiSaver default providers.”

              …and getting none.

              Despite your insistence “the beehive statement makes it totally clear” they say have not yet clearly defined or detailed anything.

            • Duker

               /  2nd March 2020

              So they need clarification on what’s the definition of fossil fuel production?
              Are they serious….it’s self evident what it is and it sure ant banks or car companies.
              There will never be clarification on inane questions.
              I looked up my kiwisavery fund and they list the names of what they call energy companies. ..it’s the usual well known names..only a ingenue wouldn’t know which of those aren’t in the business of fossil fuel production . Indeed large investors like KS know a he’ll of a lot about the comonies they invest in…evident ally the 20 something who writes for newsroom hasn’t a clue.
              Well see which other media takes up this beat up as well.

            • Duker

               /  2nd March 2020

              Just looked up BHP annual report , just like a Kiwisaver fund manager would do.
              There it is in what they do, amoung other things
              121 mill barrels of oil
              70 mill tons of coal
              Clearly they are a fossil fuel producer and as a major public company with have KS investors, who would know this.
              Sometimes journos can be so thick

        • Kitty Catkin

           /  2nd March 2020

          I hate coal fires, but have to admit that coal CAN be clean if it’s treated properly. i.e. powdered so that it doesn’t produce smoke or stink the place out.

          Reply
  2. Kitty Catkin

     /  2nd March 2020

    I use as little plastic as I can, but I would be a total hypocrite if I demanded that fossil fuels be banned.I use a computer, own various appliances and use cosmetics….

    Reply
    • Gerrit

       /  2nd March 2020

      …and drive on tar sealed roads.

      Reply
      • Kitty Catkin

         /  2nd March 2020

        Well, I don’t own a car, but I do use buses and taxis and delivery vans. I was nearly killed in a crash that put me off wanting to be on the road under my own steam for life.

        I agree with the Listener editor who said that it’s not the plastic, it’s the way we use it.They gave Hippo Rollers as an example; 90 litres of water in a container that is designed to feel like 10kg as it’s rolled along. I carried a large bottle of water to the bird table this morning and it seemed to weigh a ton. I wouldn’t tell some African that they had to struggle to carry water if they could just roll it along in a heavy-duty plastic roller.

        Reply

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