When one of this country’s most successful investors bails out of shares in particular companies the financial community takes notice, the alarm bells go off, and analysts start re-analysing.
The New Zealand Super Fund’s decision to sell down holdings in the “high carbon sector” would have had some fund managers and investors sitting bolt upright.
Its decision to exit 297 companies including two local stocks, NZ Oil and Gas and Genesis Energy surprised many market participants, but it shouldn’t have.
Professor Will Steffen has been watching the same thing happen around the world.
He is an expert in climate change and his specialist subject is the “anthropocene” a proposed new epoch in Earth’s history, brought on by the impact of humans on our planet.
Steffen was brought to New Zealand recently by Vector, the Auckland electricity infrastructure and energy company, to talk to its executives and give a public lecture.
He pointed out that long-term investors are rapidly ditching high-carbon stocks, using Sweden as an example.
“The market will not take care of [climate change]. We are basically out of time.”
– Will Steffen
“The pension funds are getting out of all fossil fuel companies, out of all oil and gas. The have stopped investing in anything to do with petrol engines.
“Their view is that these companies are not long-term investments any more and you could lose your shirt on them. Tesla for example is already worth more than General Motors.”
He says the British Government’s plan to regulate the removal of petrol-fuelled cars in 2040 makes sense.
“EVs (electric vehicles) are coming faster than we think. France and Norway are following Britain, and I don’t think Germany and Sweden will be too far behind.”
Steffen says the superannuation funds have moved away from carbon because they have long horizons but, he says, other decision-makers tend to be short-term thinkers.
“The problem with most politicians and a lot of business people is they don’t understand climate change. They see it as just the next green issue to deal with.”
“They think it can be dealt with in the traditional way, that the market will take care of it. They attack the problem with the same sort of thinking, but the market will not take care of it. We are basically out of time.”
Governments, he claims, need to consider highly-disruptive strategies, because disruption is now unavoidable.
“We will have chaos in terms of sea rise, forced migration … and it will cost us much more than if we do something now.
“If we had been sensible 15 to 20 years ago we could have made a smooth transition but we are now out of time. We either have to face disruption from climate change or disrupt the way we do things – its disruption in one form or another.”
“If we want to be serious about climate change we just have to get off fossil fuel – no matter what the price is.”
“I’m not a greenie, I still drive a big car, but I get it.”
– Michael Stiassny
Steffen, who believes business leaders and politicians need to take a much more proactive role, has found an ally in Vector’s chairman Michael Stiassny.
Stiassny, who has a reputation as an uncompromising businessman, says he has come to the view that sustainability is essential.
“I’m not a greenie, I still drive a big car, but I get it.”
Vector has been busy lately buying up solar energy companies and investing in software that will make its power grid much more flexible as battery technology changes electricity consumption patterns.
Along with the change from a rather boring lines company to a nascent technology company, Stiassny says Vector’s corporate culture has changed.
“It started with health and safety. We no longer do live line work. Other companies allow their linesman to repair outages with live lines around them, these guys are experts but there is a risk. We’ve stopped that which means things take longer to fix and our performance is affected, but culturally it is the right thing to do.”
“We also have a rainbow tick (a certification given to companies that welcome sexual and gender diversity).
“Once you are on this journey, sustainability becomes important from a cultural point of view, part of your DNA.”
Stiassny theorises that climate change is a “dark issue” for many New Zealanders, including our politicians.
“They are not getting it, they think there isn’t much a little country like New Zealand can do so it’s best not to worry about it. There is a vacuum of leadership on climate change like there is on 101 other issues in this country.
“Business needs to fill that vacuum.”
Stiassny concedes that there will be a cost as companies change to more sustainable practices, but Will Steffen believes that cost could be less than we think.
“You’re going to have to reduce agriculture emissions anyway, so why don’t you get the jump on the rest of the world?”
– Will Steffen
“British Airways has one flight between London and New York that uses biofuel. If all of the world’s airlines switched, the cost of biofuel would drop very quickly. Sweden is planning to build biofuel factories at its three main airports. It’s converting forest waste into biofuel. The technology is already there, it is just about scaling it now.”
He also sees major opportunities for countries and companies that get in front of the changes that are coming.
“Electric vehicles, solar and offshore wind farms are going to be very significant for a lot of countries. New Zealand has a great opportunity to lead the way on agriculture. You’re going to have to reduce agriculture emissions anyway, so why don’t you get the jump on the rest of the world and then have it come to you for the knowhow?
“That would be a major economic benefit for New Zealand.”
