As the entire world watches heads of states’ debates on effective actions against climate change at the UN Climate Change Conference (COP26), many investors want to take the initiative into their own hands. BT Funds Management (BTNZ), which is Westpac NZ’s KiwiSaver and managed investment arm, has now committed NZD200m to a new Paris-aligned climate investing strategy managed by Legal & General Investment Management (L&G). The new product, which is in line with a 1.5°C scenario, tracks the Solactive L&G DM (ex AU-NZ) Paris-aligned ESG SDG Index. The index was developed in a joint effort between Solactive, BTNZ, and L&G.
The Paris agreement is recognized as one of the world’s most significant conventions. Its main goal is to keep the increase of global average temperature below a critical threshold of 2°C. While this limit already poses a challenge to the global community, BTNZ’s new product goes even further below the critical point of 2°C and accounts for a reduction of greenhouse gas emissions that are in line with a 1.5°C pathway. The underlying index, the Solactive L&G DM (ex AU-NZ) Paris-aligned ESG SDG Index, is an equity index including listed companies from developed markets (excluding Australia and New Zealand). It is designed to incorporate ESG as well as the UN’s Sustainable Development Goals (SDGs) and to meet the strict EU Paris-aligned Benchmark requirements. To achieve its desired 1.5°C scenario, the index, from the start, reduces its average carbon emissions intensity against its benchmark by 50% and features additional year-on-year self-decarbonization of 7%.
In addition to its climate and highly rated ESG performing companies tilt, the index incorporates a broad ESG screening based on normative and sectorial criteria. More precisely, companies that do not comply with the UN Global Compact filter including labor, human and environmental rights, as well as companies deriving, among others, their respective revenue from coal, oil, and natural gases, are excluded from the index. Furthermore, companies with a low SDG-score, as evaluated by L&G and including environmental, social, corporate governance, and transparency criteria, are excluded from the index universe.
“Tackling climate change is, undoubtedly, one of the most challenging issues of our time, and with BTNZ’s new climate investing strategy, investors receive a powerful tool to make the world a greener place. In addition to its climate focus, the often less regarded but equally important concerns of governance and social matters are also addressed in the strategy, rendering the product a holistic approach to ESG, and not only focusing on climate change. Working with BTNZ and L&G on this index was very productive, and we cannot wait to deliver more ESG strategies with them,” comments Timo Pfeiffer, Chief Markets Officer at Solactive.
“We believe investing sustainably is a powerful way to achieve results both on and off the balance sheet. We believe that companies who follow that approach will contribute positively to the world in which we all live, and will also perform well financially over the longer term,” comments Philip Houghton-Brown, Head of Investment Solutions, BT Funds Management NZ.
