We're adopting low-carbon benchmarks to ensure emission cuts meet targets
To make sure our Investment Fund remains on-track to meet emission reduction targets, we're shifting almost our entire equity holding to low-carbon benchmarks.
ACC today announced we are shifting almost our entire holding of listed equities to low-carbon benchmarks, helping ensure our Investment Fund remains on track to reach ambitious emission reduction targets.
The changes cover about $15 billion of equity investments across ACC’s global, Australian and New Zealand portfolios, and reflect our commitment to the Paris Agreement, the Crown Responsible Investment Framework, and New Zealand’s zero carbon legislation.
Starting this month, we will adopt the MSCI ACWI Low Carbon Target Index (ACWI LCTI) as our global equities benchmark. The ACWI LCTI’s carbon intensity is 90% lower than for our existing benchmark, the MSCI All County World Index (ACWI), but otherwise has similar investment characteristics.
We will also adopt low carbon reserves benchmarks for our Australian equities. Starting this month, we are using the S&P/ASX 100 Bank & Low Carbon Adjusted Total Return Index and the S&P/ASX Small Cap Ordinaries Accumulation & Low Carbon Adjusted Index.
We changed to lower carbon benchmarks for New Zealand equities in May this year.
“ACC is committed to supporting the Government in achieving carbon reduction objectives and showing leadership on climate change,” says Chief Investment Officer Paul Dyer. “Asset owners have a responsibility to support the transition to a low carbon economy through investment decisions and interactions with investee companies.”
Building upon change
We have made significant progress in reducing the Fund’s measured carbon emissions. The carbon intensity of listed equities has dropped almost 50% from the 2019 baseline level. The new benchmarks allow us to meet interim targets for a 60% reduction in the Fund’s carbon intensity by 2025 and 65% by 2030 on our journey to net zero 2050.
Most of our listed equities are outside of New Zealand and they make up the largest part of our measured emissions. We aim to continue to earn strong investment returns for levy payers in the future while also meeting our responsibilities under the Climate Change Response (Zero Carbon) Amendment Act 2019.
ACC is an active investment manager - we aim to consistently outperform our benchmarks. In addition to adopting low carbon benchmarks, we take a further step by imposing portfolio carbon limits (reviewed annually) as an additional tool to reduce the carbon intensity of our investments. We’re on track to meet interim carbon reduction targets.
We believe divestment and exclusion can only be part of the answer. Engagement is becoming increasingly important because companies are more likely to raise their climate ambitions if held to account by responsible investors such as ACC, rather than being owned and controlled by less climate conscious shareholders.
Ultimately net zero will only be achieved if all of us - governments, companies, investors, and the public participate in the transition to a low-carbon world.
