Investing to fight climate change

The Government has launched its $100 million green investment fund.

Dubbed Green Investment Finance Ltd, or NZGIF, it aims to finance green ventures that will help reduce New Zealand’s greenhouse gas emissions. It’s hoped the fund will channel investment from the private sector into green investments. 

It’s been given $100 million start-up capital by the Government - not an insignificant amount of money but one that pales in comparison to the Provincial Growth Fund’s $3 billion. 

It’s still a political win for the Green Party, which has campaigned on starting a green investment fund since Russel Norman’s leadership of the party. It was part of the party’s confidence and supply agreement with Labour. 

Climate Change Minister Shaw said it would have a dual mandate to demonstrate the viability of the green economy and to reduce emissions. 

NZGIF is distinct from the Provincial Growth Fund in that instead of dispensing grants, it hopes to generate a return. The $100 million capital kick start will be recycled into several future investments, all going to plan.  

It will also receive $25 million in operating funding from the Government over the next five years, which will be repaid to central government. 

It will target returns of two percent above the benchmark five-year government bond rate.

NZGIF follows similar, successful ventures overseas. 

Britain’s Green Investment Bank was created in 2012 with £3 billion in start up capital, which the government there hoped would leverage a further £15 billion in private investment. The fund was eventually partially privatised in 2017, acquired by Macquarie capital in a £2.3 billion deal.

New Zealand’s fund will set a slightly lower target of leveraging two or three dollars of private capital for every dollar of public capital invested.

The fund will be chaired by Cecilia Tarrant, who is currently the Chair of the Government Superannuation Fund, which looks after pensions of Government employees. Banker David Woods will be Board Director.

The fund will take some time to announce its first investment projects.

Shaw said he expected the first announcements to come some time in the second half of next year.

Documents released with the fund say it could look investing in electric vehicles, manufacturing processes, energy efficient commercial buildings and low-emissions farming practices. 

Greenpeace's Nick Young told Newsroom he would like to see the fund invest in community solar initiatives and businesses that helped New Zealand shift to a "regenerative" farming model. 

Tarrant told media the fund’s appetite for risk could be constrained by the fact that other parts of Government looked after riskier R&D projects.

“We’re not looking to be in the R&D space, the Government has a lot of money in that space with Callaghan Innovation and that sort of thing,” Tarrant said. 

But that would not preclude the fund from making some riskier investments. 

“We will look at our risk profile across our entire portfolio and we will have a diverse range of investments so that we might have some that are more risky and some that are less. 

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