LOVELL It is challenging, but it has become easier to find appealing investment options as we have moved to a more stable position from a regulatory perspective. When I joined, three-and-a-half years ago, our then chief executive expressed doubts to me that we would ever commit our full allocation of A$10 billion (US$7.3 billion). We are now well over half way including commitments ofA$2.3 billion last year alone.

Crowding in capital is an ongoing task and we judge transactions on this basis. Itis actually getting increasingly hard to do but we make great efforts in this respect. To attract additional capital you have to demonstrate a value proposition – investors don’t just give entities money for green funding because it’s a sexy thing to do.

We are in the process right now of examining the best ways to crowd in capital. What I will say is that we now have a five-year track record of investment we can point to. This has been a net positive for the Australian taxpayer.

Regarding New Zealand, the fact that crowding in is tricky means I think it is vital that the local organisation is given sufficient scope and flexibility to make things happen. Managing 10:1 leverage is tough even if you are able to achieve it, because you can only serve so many masters.

Everyone needs to understand the rules and framework when they go into the fund, and this includes equity holders participating alongside it. The critical thing is that the market should have input on the design features of the structures being used so they can be comfortable with them.

The CEFC needs to invest on as commercial a basis as possible with a clear mandate about what it will address. The task at hand is massive: we could put all our A$10 billion into property investments tomorrow, for instance, without beginning to address the substantive issues Australia is facing in reducing its emissions.

New Zealand has a very interesting problem in that its electricity grid is fundamentally fine but its emissions and sustainability tasks are actually much more complex. We find it very challenging to find investable propositions in things like sequestration, for instance – which is an area I assume New Zealand would have a natural interest in.

It’s hard to make a viable investment proposition on a sustainable basis while achieving carbon outcomes by sticking a tree in the ground. This is why bodies like the Green Investment Fund need flexibility and to be properly resourced with people with the right credentials.

GREWAL ESG is a big focus across markets and of course decarbonisation is one of the biggest challenges the world faces today. We believe active sustainability, energy-efficiency and decarbonisation strategies are return enhancers and risk mitigants rather than just compliance activities. The CEFC has actually just cornerstoned a sustainability focused fund with us in Australia, and we look at ways to make our assets energy-efficient across our investment portfolios.

We are committed to showing tangible results – it’s not just about sticking a solar panel on a roof. ESG risks and opportunities form part of our review of all investments and are revisited regularly. This is managed at all stages of the investment cycle, from due diligence through to ongoing management and operation of an investment portfolio.

We have a sustainability officer, who joined us this year. Investments that go before our investment committee also get looked at by our sustainability officer for input into what we could be doing from an ESG perspective, as part of our investment thesis.

PURDY Accident Compensation Corporation has a legislated requirement to invest in a manner that is not detrimental to the reputation of New Zealand.

This is a key driver for us. But it’s harder for us, as an entity with government money, to run the process of establishing what society thinks is and isn’t an ethical investment. In the private sector, you can lay out your standards, say what you won’t invest in and – hopefully – clients will agree and choose to invest in your product.

Our approach is that, ultimately, the only objective standard available to us is whether something is legal. For instance, we don’t invest in fishing companies that take part in whaling – because even though it is legal in Japan it isn’t here. But it’s a challenging area: you could take a list of the top 50 companies in New Zealand and come up with a reason not to invest in each of them.

LOVELL We see a wide spectrum of ESG integration among investors. We speak to some fixed-income fund managers in Australia that have really gone as far as they can to respond to mandate requests to report on ESG – because they feel it is a strength – but the responses that have come back after the process concludes have differed.

Mostly, strong ESG reporting has helped win mandates. Sometimes a manager missed the mandate for unrelated reasons. But sometimes the feedback has been that the focus on ESG actually wasn’t particularly desired – it was just a box-ticking exercise for the end investor.

It’s the same with asset allocators and fund advisers. Some have virtually never heard of ESG, others are right on the case. Australia has layers of intermediation that make it significantly more challenging to see those signals flowing through.