NZ Super Fund has undertaken a comprehensive overhaul of its multi-factor equities portfolios in pursuit of sustainability integration, with an emphasis on striking a delicate balance between meeting ESG goals and securing factor alpha.
In collaboration with external managers, including Northern Trust Corporation, AQR Capital Management, and Robeco, the fund revamped its approach without compromising factor exposures. This transformation involved transitioning to the MSCI Inc. World Climate Paris-Aligned index as a benchmark while permitting managers to design portfolios aligned with ESG objectives. The fund’s diligent research led to modifying its investable universe and benchmarks, which was crucial in maintaining performance while upholding sustainability aspirations.
While the cost implications of integrating ESG considerations into multi-factor equities are uncertain, New Zealand Super’s evolving strategy underscores its commitment to responsible investing and pragmatism. The cost implications of implementing and reporting on these changes are noteworthy, particularly as the fund expands into impact measurement, an area gaining traction among asset owners. Balancing these initiatives against cost considerations will determine the true success of New Zealand Super’s sustainable finance transition.