The council’s strict "zero tolerance" approach to fossil fuels was not common practice, councillors heard this week.
Still, Cr Alan Somerville said even with the council’s additional "ethical investment" exclusions of weapons, gambling, alcohol, nuclear power and a range of other categories, the council had 82.2% of the "investible universe" to invest in.
It was important the council took a firm stance on fossil fuels, Cr Somerville said.
"As an organisation that is primarily concerned with environmental management — and more so, as time goes on, with the resilience of our communities — then I would pull every possible lever we have to take action on climate change.
"This is one of the ways of doing that."
Cr Somerville said he looked forward to a time when companies that were now earning some revenue from fossil fuels got out of them entirely so the council could invest in them again.
And although the council’s investments were "not huge", he hoped the investment policy could add to the pressure on companies to divest from fossil fuels, he said. JBWere senior strategist Phil Borkin said it was often "industry practice" to have some small tolerance, a revenue threshold, on these types of exclusions.
The council’s zero tolerance approach to fossil fuel power generation companies ruled out 394 companies, including Contact Energy, which was a significant part of the council’s investment in the New Zealand equity market.
In the case of Contact Energy, Morgan Stanley Capital International analysis showed about 11% of the company’s revenue was oil and gas related, he said.
Under the council’s zero tolerance policy, it would be ruled out.
"It’s totally fine to stick with your values, but there’s a balance to be had with it impacting on the quality of your returns, and particularly the risk that you’re potentially taking," Mr Borkin said.
"There’s no right or wrong answer here, it’s around the risk and the tolerance you’re happy to have.
"It’s a tricky conversation, but the reality is the more restrictive you are in saying you can’t own parts of the market, the greater likelihood it is going to impact on your risk-adjusted returns overall," he said.
Crs Kevin Malcolm, Gary Kelliher and Michael Laws voted against the new policy.
In a statement yesterday, Contact said it had been two years since the company set its strategy with a vision to lead the country’s decarbonisation.
The past year included significant transformation and progress on the path to decarbonise its portfolio.
"The decarbonising our generation portfolio is well under way, while also ensuring security of supply and energy affordability to New Zealanders.
"We currently have $1.2billion worth of renewable generation under construction and a significant pipeline of further potential geothermal, wind, solar and battery investments," the company said.
"In 2021-22 our generation from thermal fuel sources contributed to 8% of our revenue, and in 2022-23 it contributed to 4% of our revenue.
"We do not have upstream fossil fuel operations."
The company offered no view on the council’s zero tolerance policy.
