Low emissions, higher value, report suggests

The research found that institutional investors were increasingly focused on environmental issues in response to changing investment mandates. The report said more capital was likely to flow into low-emitting companies in the future compared to higher emitters.

The report said there were three reasons for the underperformance: Higher emitters were subject to stranded asset risk, such as coal-fired power generators in Europe; there was regulatory and financial risk for higher emitters that would potentially affect future earnings and valuations; and institutional investor mandates were increasingly focused on sustainability issues.

Fonterra was the the most exposed NZX company to Greenhouse Gas Emissions (GHG) over the longer term due to the risk to its farmer suppliers. It had the highest emissions, followed by Z Energy.

There was some short-term margin pressure on Genesis Energy and Contact Energy, but in the long-term Forsyth Barr expected them to benefit along with other electricity generators from increased electricity demand by transport and industrial processes. Z Energy and aviation-exposed companies Air New Zealand and Auckland Airport faced risks to longer-term volume growth.