Climate investment in New Zealand: building the foundations

Climate investment is no longer a niche pursuit. It is increasingly recognised as core financial practice. While previous surveys of the New Zealand investment sector have shown slow progress, this year’s survey shows more investors are integrating climate action into their investment processes.

Action is still lagging opportunity, but the foundations are being put in place for investment to play a role in accelerating climate action.

The Survey of Aotearoa New Zealand investors: Climate policies and actions 2025, undertaken by the Centre for Sustainable Finance, Mindful Money and the Investor Group on Climate Change (IGCC), reveals that climate risks are now firmly on board agendas, climate policies are in place and emissions are being monitored.

The next stage is to translate the structures into action – capital flows into climate solutions remain stubbornly low. The survey captures the views and practices of 27 major New Zealand investors, representing more than $263 billion in assets under management – more than half of the country’s total.

The drivers for action are clear, with investors citing fiduciary duty, risk management and delivering positive social and environmental outcomes. As the report notes, “investors recognise climate as a core part of financial management”, with 87% of respondents identifying multiple drivers.

This alignment between climate and sound financial practice is encouraging. Climate considerations are no longer being seen as ‘extra’, but as essential to prudent governance.

Despite this, familiar barriers persist. A lack of clear definitions, policy uncertainty and lack of data were identified as the top obstacles to climate-aligned investing. Interestingly, client demand was not considered a barrier.

On the contrary, public expectations are high. Research by Mindful Money shows 74% of New Zealanders expect their fund to reach net zero before 2050. New Zealand investors clearly understand the financial imperative of managing climate risk.

The survey of investors was undertaken across New Zealand, Australia and Asia. While the comparisons between countries are instructive, there are differences. Further, while the questions are the same, the Australian survey covers IGCC members, generally larger investors, whereas the New Zealand survey covers a far broader range of asset owners and fund managers.

The New Zealand survey shows board-level awareness has certainly strengthened, with 91% of investors reporting that climate strategy and risk are discussed at the top table. Yet only 52% provide regular financial reporting on climate metrics to boards, and just 22% assess the climate knowledge of directors and management.

Perhaps the most striking gap is in executive remuneration: while 28% of Australian investors now link pay to climate performance, not one New Zealand investor surveyed has done so.

Despite the differences in respondents, this should be a red flag for New Zealand directors. If boards are serious about driving climate performance, aligning incentives is a powerful lever.

Almost half of New Zealand investors (48%) now have net zero targets, up from 30% in 2023. An important reason for the improvement has been the collaborative initiative by trusts and foundations to act on their investments.

Asset owners play a crucial role in driving progress across the fund management sector, and the commitment of 18 leading signatories provides real impetus for progress. Yet compared with Australia, where 82% of investors have net zero targets, New Zealand still trails.  

Despite the governance improvements, the report highlights a significant shortfall in deploying capital into climate solutions. Only 17% of investors currently allocate capital to solutions – such as renewable energy, low-carbon transport or green infrastructure – and just 13% have published targets.

Despite falling costs and rising opportunities in clean technologies, investment in climate solutions remains low. This is potentially a missed opportunity for both returns and impact.

The opportunity is not just environmental but economic, and directors should be asking why New Zealand investors are still slow to capture value where costs are falling and public demand is rising.

Another area where New Zealand lags is stewardship. While 42% of investors engage with companies on climate issues (notably, only asset managers, not asset owners), few are prepared to escalate. Only 22% said they would vote against a director’s re-election on climate grounds, compared to 66% in Australia.

This reluctance to exercise shareholder power weakens accountability. If boards and executives face no consequences for inaction, progress will remain slow.

The findings pose both an encouragement about recent progress, at least partly because of Climate-Related Disclosures (CRD), and a call to action. Climate risks are material, but so are the opportunities.

This is fundamentally about capital allocation: whether capital is being directed into opportunities that are aligned with managing risk and long-term value creation, or whether it remains stuck in the status quo.

Boards should be asking management not only how they are aligning investment strategy with net zero pathways, but also how they are ensuring that capital is flowing into solutions, not just screening out risks. They should be testing whether their remuneration structures, governance oversight and stewardship influence are genuinely driving change, or whether they simply look good on paper.

The next few years will be decisive. Investors, regulators and the public expect not just policies, but measurable action. These gaps reflect the challenge of meeting climate issues as core financial levers. As more countries implement climate reporting, the tools and data are improving, the economics are shifting in favour of solutions and public expectations are rising.

Climate is a governance responsibility, a financial risk and a reputational challenge. The gap between promises and practice remains wide – boards have both the responsibility and the opportunity to close it.

For New Zealand to keep pace internationally and to protect long-term value, directors must ensure capital allocation decisions reflect not only the risks of climate change, but the opportunities to build resilience and deliver impact.

In governance, as in investment, alignment matters. The question for boards is whether they will use their influence to ensure that commitment is matched by capital.