Mercer has increased the environmental, social and governance (ESG) ingredients across its $2.4 billion KiwiSaver following a similar recipe change in the manager’s conservative fund late last year.
In a release, Mercer says as well as including the usual range of ‘sin stock’ exclusions, the enhanced ESG approach would give more weight to companies driving positive changes such as renewable energy, water infrastructure and pollution reduction.
According to the statement, the portfolio realignment – due to complete in June – goes “beyond exclusions to positively include a greater impact investing approach across Mercer’s KiwiSaver funds, working with managers to invest actively in industries that generate positive and measurable social and environmental impacts”.
Ronan McCabe, recently confirmed as Mercer NZ chief investment officer, said the ESG tilt was in line with the firm’s belief that responsible investing leads to better long-term returns.
“Strengthening our socially responsible investment strategies across all our KiwiSaver funds marks a continuation of our investment approach that incorporates ESG characteristics into our investment decisions,” McCabe said. “We look forward to making further announcements on our progress.”
Mercer adjusted its KiwiSaver conservative fund to new ESG guidelines last September, slicing 11 basis points off the price into the bargain. The Mercer KiwiSaver conservative fund, used as the default option, fell to 0.47 per cent following the fee reduction. However, fees remain as is following the broader ESG upgrade across the entire fleet of Mercer KiwiSaver funds.
Along with about a dozen managers, Mercer awaits the final call, expected within days, from the official selectors as they appoint the next tranche of KiwiSaver default scheme providers.
Under the process begun late last year, the government has upped the default asset allocation to balanced, applied fossil fuel stock exclusions, set lower fee expectations and suggested almost halving the current number of providers in the scheme-of-last-resort merry-go-round.
Mercer is one of the incumbent default providers.
And as the world celebrated the official ‘Earth Day’ last week, a number of global financial firms, including Russell Investments, marked the occasion by signing up to a ‘net zero’ carbon pledge.
In a statement from the Russell Seattle HQ, chief Michelle Seitz, said the US$326 billion had joined the ‘Net Zero Asset Managers Initiative’ first launched near the end of 2020.
Managers aligned to the group commit “to supporting the goal of net-zero greenhouse gas emissions by 2050 or sooner”.
Russell would aim for carbon neturality across its portfolios by 2050, the statement says.
Seitz said in the release: “Russell Investments is focused on constructing investment portfolios that generate long-term sustainable value, and climate change will likely have a material impact on investment outcomes in the coming years.
“We don’t take this pledge lightly. We will work to evolve our investment approach and take the necessary steps to achieve this net-zero goal while continuing to deliver on our fiduciary obligations to clients.”
Russell plans to boost its responsible investing team and establish a net-zero transition unit to shepherd the plan.
Along with Russell, 13 other firms joined the Net Zero Asset Managers Initiative last week, bringing the total membership to 87, representing US$37 trillion.
The new signatories included the world’s third-largest asset manager, State Street Global Advisors, which joined the number one and two players – respectively, BlackRock and Vanguard – in the club.
After a stellar asset-gathering year, BlackRock recently punched through US$9 trillion under management with Vanguard (US$7.1 trillion) and SSGA (US$3.6 trillion).
As part of the Net Zero Asset Manager announcement, John Kerry, US special presidential envoy for climate, said: “The largest financial players in the world recognize energy transition represents a vast commercial opportunity as well as a planetary imperative.
“As countries around the world move to decarbonize, the large sums these institutions are dedicating to climate solutions reflect a growing understanding that the transition to a low-carbon global economy will be critical for their business models. To be credible and effective as market signals, these financial commitments should adhere to clear definitions, metrics, and reporting. Ultimately, the transition to this new economy will create a massive number of new jobs and increase our collective ability to tackle climate change.”