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Sustainable Investment
Last updated: 28/02/2025
At Mercer New Zealand, we take our Sustainable Investment Policy into account when managing our investments, believing that sustainable investment approaches are consistent with an objective to create and preserve long-term investment capital, where relevant and aligned with achieving investment objectives.
Our Sustainable Investment Policy is informed by our global philosophy and principles, updated in 2024 here, and our local experience implementing and evolving our sustainable investment approach for over a decade.
We have principles to guide our implementation approach, summarised into four techniques:
- Integration of environmental, social and governance (ESG) factors in relevant investment decisions may potentially enhance portfolio resilience. This includes appointing investment managers who assess and reflect ESG risks and opportunities when they select investments and construct their portfolios.
- Stewardship, via engagement with investment managers, companies and policymakers and/or via proxy voting at listed company annual general meetings, may improve investment outcomes by leveraging investor rights and influence. Engagement may be undertaken with companies or policymakers via appointed investment managers, collaborative initiatives and/or directly by us.
- Exclusions that seek to avoid investment in, or remove or reduce exposure as much as practicable to, certain companies or securities with involvement in defined products or business activities may help respond to stakeholder expectations where integration and stewardship are considered to be insufficient.
- Investment in themes, which is only applicable to the Sustainable Funds (refer to the Sustainable Investment Policy section on Sustainable Funds – Investment in Themes), may provide additional opportunities to improve risk-adjusted returns.
Refer to the Sustainable Investment Policy for more information about these principles and implementation techniques.
Mercer New Zealand also publishes a Sustainable Investment Report which provides a summary of sustainable investment activity.
Exclusions
For the Mercer Investment Trusts New Zealand (MITNZ), Mercer Investment Funds and Mercer Wholesale Funds.
Exclusions involve seeking to avoid investing in, as well as removing or reducing exposure as much as practicable to, certain companies with involvement in defined products or business activities.
Exclusions can be used to respond to evolving societal norms and expectations, including New Zealand Government policy positions, especially where integration and stewardship are considered to be insufficient or not applicable.
Exclusions may be implemented either as rules-based, pre-defined criteria (such as the Exclusions Criteria defined below) or an escalation response for specific holdings related to an engagement process (as described below under the “Stewardship” section). The below documents our approach to rules-based exclusions.
As described below, our application of exclusions is generally determined by the asset class and nature of the holdings, and are subject to the operational limitations and exceptions.
Exclusions only apply to Directed Investments. If a Directed Investment meets an Exclusions Criteria, our investment managers will generally be expected to divest the Directed Investment in a reasonable period of time and as market conditions allow.
Exclusions Criteria
As at the date of this Policy, appointed investment managers are required to apply the following exclusions to the Directed Investments of the Funds (‘Exclusions Criteria’), unless an operational limitation as noted below, or other factors beyond our reasonable control, mean they are not possible to apply.
Exclusion |
Exclusions Criteria |
Controversial weapons |
Companies that manufacture whole weapons systems, or delivery platforms, or key components that were developed or are significantly modified for use in cluster munitions, anti-personnel landmines, biological or chemical weapons or nuclear weapons (regardless of revenue). Companies with involvement* in the production or retailing of automatic or semi-automatic civilian firearms or ammunition (regardless of revenue). |
Tobacco |
Companies with involvement* in the production of tobacco, manufacture of nicotine alternatives or tobacco-based products (regardless of revenue), including subsidiaries and joint ventures. Nicotine alternatives and tobacco-based products include, for example, nicotine vaping products such as ‘vaping’ devices and e-cigarettes. Any other company that derives greater than 50% of revenue^ from tobacco-related distribution, wholesale or retail, and services such as marketing or supplying products necessary for production. |
Russian assets# |
Defined as:
|
* Involvement is determined by a third party ESG research provider, currently ISS ESG, typically assessed based on revenue derived from defined activities (no revenue thresholds) or in the case of expansion metrics assessed based on capital expenditure.
^ Revenue is gross revenue in the last full financial year or, where not available, net revenues based on available company filings.
# Mercer New Zealand has instructed its investment managers to divest any existing exposure to Russian securities as market conditions allow and to prohibit any new investments in Russian securities. This may mean that some Funds still retain exposures to Directed Investments in Russian securities, as Mercer New Zealand seeks to divest in a manner that promotes the best interests of investors.
Further to the exclusions listed in the Exclusions Criteria section above, additional exclusions also apply for the Responsible and Sustainable labelled Mercer Investment Funds and the Socially Responsible labelled MITNZ portfolios.
Applying Additional Exclusions Criteria may affect investment risks and returns where, for example, there are exclusions to investments in companies that are not typically excluded in other funds. If those excluded companies perform well or poorly in certain time periods, there may be differences in return outcomes compared to a benchmark or comparable fund where those exclusions are not applied.
The Additional Exclusions listed below apply to the Directed Investments of some asset classes – equities, global bonds and global credit – for the Responsible and Sustainable labelled Mercer Investment Funds and the Socially Responsible labelled MITNZ portfolios (‘Additional Exclusions’) within certain revenue thresholds, unless exceptions (as noted below) or other factors beyond Mercer New Zealand’s control mean they are not possible to apply Other Fixed Income, Overseas Sovereign Bonds and New Zealand Sovereign Bonds asset classes do not have the below Additional Exclusions.
These Additional Exclusions for responsible and sustainable labelled Equities are defined as:
Additional Exclusion |
Additional Exclusions Criteria |
Coal, oil, or gas |
Companies with involvement* in the following as defined by Global Industry Classification Standard (GICS) sub-industry:
Companies that own proved or probable reserves in coal, oil, or gas; and derive in excess of 15% of their revenue^ from exploration and extraction of thermal coal, oil or gas. Where referred to above, ‘coal, oil or gas’ includes these fuels where derived from unconventional sources such as tar sands or shale. |
Adult entertainment |
Companies with greater than 10% of revenue^ from adult entertainment-related business activity (adult entertainment-related activities mean production, distribution and not accessible to minors as defined by third-party data provider). |
Alcohol |
Companies with greater than 10% of revenue^ from alcohol-related business activities (alcohol-related activities mean production, distribution and services to the production of alcoholic beverages alcohol as defined by third-party data provider). |
Gambling |
Companies with greater than 10% of revenue^ from gambling-related business activities (gambling-related activities mean production, services and distribution of gambling products as defined by third-party data provider). |
Depleted uranium |
Companies with involvement* in the development or production of depleted uranium ammunition/armour. |
^ Revenue is gross revenue in the last full financial year or, where not available, net revenues based on available company filings.
The following Additional Exclusions apply to responsible and sustainable labelled Global Credit and are defined as:
Additional Exclusion |
Additional Exclusions Criteria |
Nuclear weapons |
Companies with involvement* in the development or production of nuclear weapons. |
Depleted uranium |
Companies with involvement* in the development or production of depleted uranium ammunition/armour. |
Tobacco |
Companies that derive greater than 10% of revenue^ from tobacco-related distribution, wholesale or retail, and services such as marketing or supplying products necessary for production. |
Cannabis |
Companies that derive greater than 10% of revenue^ from cannabis (medicinal or recreational) production, distribution or services. |
Saudi Arabia |
Saudi Arabian securities, defined by country of incorporation or where the security has a primary listing in Saudi Arabia, including subsidiaries. |
Adult entertainment, |
Companies with a material exposure to adult entertainment, alcohol or gambling, where materiality is defined as greater than 10% of revenue^ from production and/or distribution, wholesale or retail, and services such as marketing or supplying products necessary for production. |
Live animal exports |
Companies that derive greater than 10% of revenue^ from live animal export for the purpose of selling live animals for slaughter, husbandry and breeding subjects, including specialised transportation services specifically designed to facilitate live exports. |
Animal fur production |
Companies that derive greater than 5% of revenue^ from fur production. |
Thermal coal mining |
Companies that derive greater than 5% of revenue^ from thermal coal mining. |
Oil sands production |
Companies that derive greater than 5% of revenue^ from oil sands production. |
Fossil fuels |
Companies that own proved or probable reserves in coal, oil or gas and derive greater than 15% of revenue^ from exploration and/or extraction of coal, oil, or gas; or companies with a primary business activity in any of the excluded sub-sectors below:
Where referred to above, ‘coal, oil or gas' includes fuels derived from conventional and unconventional sources such as tar sands or shale. |
*Involvement is determined by a third party ESG research provider, currently ISS ESG, typically assessed based on revenue derived from defined activities (no revenue thresholds) or in the case of expansion metrics assessed based on capital expenditure.
^ Gross revenue in the last full financial year or, where not available, net revenues based on available company filings.
The Exclusions Criteria and Additional Exclusions listed above are current as at 28 February 2025 and changes may occur from time to time. Any changes will be shown here.
Stewardship
As a shareholder of publicly listed companies, Mercer New Zealand has the right to vote at shareholder meetings and regards voting our shares as important.
Mercer New Zealand engages the services of a third-party proxy advisor to provide proxy voting research and facilitate the collation and reporting of proxy voting data which Mercer New Zealand uses to monitor manager voting. Our ability to directly monitor and report on proxy voting only applies to Directed Investments. Mercer New Zealand’s proxy voting records (to the extent that these are available e.g. for Directed Investments) can be found here and are updated on a six-monthly basis, within three calendar months of the end of the reporting period and show the prior twelve months. Please select New Zealand from the regions drop down menu.
Additional information about Stewardship is noted in the Sustainable Investment Policy.
RIAA Certification
We are proud that the following funds have been externally certified by Responsible Investment Association Australasia (RIAA)1, an organisation that operates the world’s first certification programme for responsible investment products.
- Mercer Sustainable Balanced Fund
- Mercer Responsible Trans-Tasman Shares Fund
- Mercer Responsible Global Shares Fund
- Mercer Responsible Hedged Global Fixed Interest Index Fund
Other Information
- Scheme documents such as Product Disclosure Statements, Statement of Investment Policy and Objective, Information Memorandums and Investment Guidelines are available under the Documents tabs at the following links:
- Mercer Investment Funds (also available via the Disclose Register)
- Mercer Wholesale Funds
- Mercer Investment Trusts New Zealand Single Sector and Diversified Funds
- Portfolio holdings for the Responsible and Sustainable labelled Mercer Investment Funds can be viewed here. The portfolio holdings for the remaining Mercer Investment Funds are available via the Disclose Register.
- The Mercer Investment Funds is a managed investment scheme. Mercer (N.Z.) Limited is a climate reporting entity (CRE) and is therefore required to publish annual climate-related disclosures for all registered managed investment schemes for which they act as manager. You can access the latest climate-related disclosures at crd-app.companiesoffice.govt.nz or at the following link: Mercer NZ Climate Statement.
Contact Us
For more details you can contact us via email nzportfolios@mercer.com.
1 The Responsible Investment Certification Program does not constitute financial product advice. Neither the Certification Symbol nor RIAA recommends to any person that any financial product is a suitable investment or that returns are guaranteed. Appropriate professional advice should be sought prior to making an investment decision. RIAA does not hold an Australian Financial Services Licence. RIAA’s RI Certification Symbol signifies that a product or service offers an investment style that takes into account environmental, social, governance or ethical considerations. The Symbol also signifies that the listed Mercer Investment Funds adhere to the operational and disclosure practices required under the Responsible Investment Certification Program for the category of Product. The Certification Symbol is a Trademark of the Responsible Investment Association Australasia (RIAA). Detailed information about RIAA, the Symbol and the Mercer Investment Funds’ methodology, performance and stock holdings can be found at www.responsiblereturns.com.au, together with details about other responsible investment products certified by RIAA.