Fund supervisor advises on navigation in New Zealand's unsure local weather emergency panorama


New Zealand Prime Minister Jacinda ArdernNew Zealand Prime Minister Jacinda Ardern. Von Newzild – Own work, CC BY-SA 4.0, Link

Guest essay by Eric Worrall

Soon in the USA? John Berry, manager of the Pathfinder Ethical Investment Fund, advises on which sectors to avoid in order to protect your money from the New Zealand climate emergency. But the reality is that now there is likely no security to damage political interference, even if your interest is in green energy.

Monday Thoughts: Investors can't afford to ignore climate change

John Berry
05:00, December 07, 2020

OPINION: This week our government announced a climate emergency led by the UK, France, Canada and Argentina. This reaffirms our goal of being climate neutral by 2050 and supports our commitments under the Paris Agreement.

The declaration of a climate emergency challenges investors by highlighting the future impact on the business and profitability of the company.

The most widely used tool for responsible investing are exclusions. This means avoiding investments that cause harm and is typically applied to gun, gambling and alcohol companies.

But simply avoiding companies does not bring about any change. Because of this, exclusions don't go far enough.

A positive lens for investing can be applied by using environmental, social and governance (ESG) factors to rank companies alongside traditional financial metrics. There is a wealth of research around the world that shows that this analysis helps create portfolios with lower risk and better performance.

One final strategy for responsible investors worried about climate change is to limit the investment universe to only positive topics that will benefit our planet. These topics could include water companies, forestry and renewable energy such as wind and solar manufacturers.

John Berry is a co-founder of ethical investment manager Pathfinder Asset Management and ethical KiwiSaver provider CareSaver.

Read more: Thoughts-investors-cant-afford-to-ignore-climate-change

What a nasty, insecure regulation for New Zealand investors.

Oil companies or airlines could be penalized at any time under the auspices of coping with the climate emergency. However, history suggests that unfashionable but vital businesses that are collapsing under the weight of the penal code might also receive surprise government leaflets to help them get going.

Australia is already in the middle of this sad mess. When key coal-fired power plants began to shut down due to a hostile business environment sustained by successive administrations, the Australian government panicked and signed murky support agreements that likely included substantial monetary subsidies to keep aging coal-fired power plants operating – Australia still needs the electricity they produce.

However, you cannot rely on handouts to arrive in time to save your investment or to continue for a predictable period of time. Hence, these rundown coal-fired power plants are likely to sink into the ground with minimal maintenance. Nobody is interested in replacing them with new plants.

“Ethical” green investments are no better. Even if you follow Berry's advice and invest in wind farms or solar panels, the subsidies your investment needs to be profitable only exist for the pleasure of politicians and bureaucrats. As green investors in Spain learned in 2010, such subsidies can be withdrawn without warning if the government runs out of money.

Even cultivating a special relationship with the government does not necessarily provide protection. Many very large investors, regardless of what relationships they believed they had, were hard hit when Spain suddenly broke all its agreements and cut subsidies for renewable energy.

The unpredictable investment landscape created by New Zealand's climate notice statement is a key reason not to invest in New Zealand even if you are interested in green energy. Politicians have effectively taken control of the formerly free market. The investment capital of New Zealand investors is now effectively under the control of politicians and bureaucrats. Profits now exist at the whim of warriors of social justice.

History suggests fair investor treatment will come at the end of a very long list of SJW concerns.

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