The $250 million plus BayTrust has shifted about $30 million in global equities to UK manager Baillie Gifford following a review based around the fund’s recently upgraded sustainable investment principles.
Alastair Rhodes, BayTrust chief, said the community trust has just completed the transition to Baillie Gifford from portfolios previously managed by RWC and GQC.
“Both RWC and GQC are good managers but we felt they didn’t fit with our long-term sustainable goals,” he said.
The trust also has a global equity allocation to the Al Gore-founded Generation Investment Management, which runs a concentrated portfolio of ‘high conviction’ stocks filtered through a sustainability lens.
BayTrust changed its statement of investment principles and objectives (SIPO) last year to reflect a stronger commitment to environmental, social and governance (ESG) goals.
Under the revised SIPO, BayTrust plans to “transition its investment portfolio over the next 10 years (in a structured and efficient manner and when opportunities present) with the long-term goal for its entire investment portfolio to be Sustainable by 2030, or earlier if possible”.
According to Rhodes, the organisation is now turning the aspiration into action with a range of operational moves that should see it meet sustainable targets ahead of schedule.
In a recent presentation to fellow community trusts he said BayTrust was already on track to meet the short-term goal of halving the portfolio exposure to carbon by 2025.
However, the decarbonising to-date has largely come through relatively “easy wins” in changing the trust’s global equities portfolio while “the next stage will be a lot harder”, the release says.
Rhodes said the fund would invest more in green economy transition projects around the world as well as bolstering its allocation to community housing in the Bay of Plenty region.
BayTrust has earmarked up to 20 per cent of its portfolio (or $50 million on current valuation) for such impact investments over the next 10 years.
“We’re at about 10 per cent now,” he said, with a number of investments lined up in the near future.
In the statement, Rhodes said BayTrust was considering a few “impactful infrastructure opportunities”, mostly overseas.
“And as climate change knows no boundaries, we can invest offshore while continuing to explore national opportunities,” he said. “We’ve already invested in offshore wind farms and there’s significant opportunities in the US and Europe around helping to decarbonise their energy sector. We will be targeting investments that assist with the transition to greener and climate-friendly economies, particularly in the unlisted private equity and infrastructure space.”
For example, BayTrust has invested with the Europe-based renewable energy specialist Copenhagen Infrastructure Partners (CIP). Last week CIP struck a deal with the NZ Superannuation Fund to sound out prospects for a windfarm off the South Taranaki coast.
“It would be great to see a windfarm opportunity in Taranaki,” Rhodes said. “Maybe community trusts could get a syndicate together to invest in it.”
He is also pushing for greater collaboration between community trusts – and the wider NZ trust market – on issues of collective concern such a climate change.
BayTrust was a foundation signatory to the ‘Funders commitment on climate action’, which attracted 10 of the 12 community trusts aboard at launch late last year.
But Rhodes said the group hoped to widen the initiative to include other charitable trusts.
“We’re talking to a few trusts in our region who might take the pledge,” he said.
However, he said it was surprising how many charitable funds had yet to consider climate risks in their investment planning processes given the need to prepare now.
“If you set targets for 2040 or 2050 it’s kicking the can too far down the road, and increasingly climate change evidence points to the fact we only have five or 10 years to act to mitigate the worst long-term impacts,” Rhodes said in his presentation. “If you set targets that are only three or four years out, that means you have to start now and you can’t ignore those deadlines.”
BayTrust is looking increase trustee training on sustainable investment issues while also engaging more specialists in the field.
Over the 12 months to the end of March 2021 the Tauranga-based community trust returned over 24 per cent in a bumper year for most investors.
Despite a rockier investment environment over the most recent 12-month reporting period, Rhodes said the trust is on track to return about 7 per cent, largely boosted by private asset holdings.
US-based investment consultancy, Cambridge Associates, advises BayTrust.