Investment entities, including those in the public sector, are increasingly looking to drive climate change outcomes through engagement with private sector investee companies in Aotearoa New Zealand (NZ). This trend is reflected in the position statement recently issued by the Accident Compensation Corporation, Government Superannuation Fund Authority, NZ Superannuation Fund and National Provident Fund (together known as Crown Investors). This statement outlines the Crown Investors' intention to work directly with New Zealand companies, in order to better meet their climate objectives.
This confirms an opportunity and competitive advantage for companies going to market to secure capital, where they can demonstrate their low-emissions credentials. However, equally, this is an example of increasing regulatory and market pressure on companies seeking investment to respond to the impacts of climate change and demonstrating that capability backed by a plan.
When looking at investment opportunities, the Crown Investors will, among other things:
seek to understand investee companies' relative progress on climate change awareness, capability, commitments and emissions assessment and reduction;
seek to understand how investee companies are meeting regulatory requirements on climate-related disclosures and reporting;
Once an investor, a Crown Investor is likely to:
support investee companies to prepare for the transition by sharing knowledge of climate change risks and opportunities from an institutional investor's perspective; and
require climate-related information from investee companies to support and demonstrate the Crown Investor's climate change objectives as an investor, including reporting on greenhouse gas emissions, exposure to climate risk, and transition plans, including net zero targets and strategies.
The Crown Investors issued the position statement against the backdrop of both their commitment to the "Net Zero Asset Owner Asset Commitment" and their obligations (which arise as a result of a Ministerial letter of expectation) to report under NZ's mandatory climate-related disclosures regime (which currently only applies in the private sector to certain licensed entities and NZX listed companies).
In relation to the climate related disclosures regime, the position statement is an example of the types of pressure that "climate-reporting entities" (CREs) subject to the regime may begin to place on other entities in their value chains, irrespective of whether those entities are themselves captured by the regime. CREs are required to report on a wide range of matters relating to their climate risks and opportunities, including in relation to their value chains, and are therefore incentivised to work with their suppliers, customers, and investees to respond to the impacts of climate change.
Investee companies in the energy sector should consider how their own climate ambitions and transition plans align with those of their key stakeholders and potential funding sources, including by assessing whether they are able to provide investors with the information required to monitor progress towards the investors' own climate change objectives. Investee companies that can demonstrate to CREs robust transition plans and provide detailed, easy to digest records that support the investee's own disclosure obligations will be better positioned to take advantage of investment opportunities.
We expect to see this trend continue as we transition to a low-emissions future.
This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.