Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Green Investment Fund targets will depend on portfolio

Green Investment Fund targets will depend on portfolio – Treasury

By Paul McBeth

June 21 (BusinessDesk) - The government’s $100 million Green Investment Fund isn’t targeting an overall rate of return, but will instead weigh up each investment on an individual basis.

Treasury deputy secretary Struan Little told Parliament’s finance and expenditure select committee on Wednesday that the department had supported the government’s plan to get the fund up and running, and that it was now incorporated as a company.

He said he wasn’t aware of any work being done on returns, or an acceptable discount, given the focused nature of the fund.

“We’ll, of course, be particularly interested in its returns, but that’s a matter for the future,” he said.

Chief economic adviser Tim Ng said the ultimate returns will depend on the portfolio, but agreed with Act Party leader David Seymour, that all things being equal, “you would expect if you have a smaller slice of the market portfolio than otherwise, you would expect a higher risk or lower return – some combination.”

Seymour has in the past criticised the fund as corporate welfare, saying it will be picking technologies that can’t attract capital in an open market.

The fund was a commitment in the Labour and Green parties’ governing arrangement and will focus on investing in decarbonisation outside renewable energy, which already forms the backbone of New Zealand’s electricity generation.

It has a benchmark of the five-year government bond rate plus 2 percentage points. The yield on the five-year rate was recently 1.22 percent, implying a hurdle of around 3.22 percent.



Ng said the fund will have the usual choice of benchmarks to measure the fund’s performance, and to help make conscious choices about the investments that will be in the portfolio.

“The whole point of having a fund like this is that it’s a new area of investment and that by definition the types of investments the fund might be looking to invest in are not the ones that are particularly deep and liquid,” Ng said.

“The choice of benchmark is quite important.”

National MP Andrew Bayly, who helped found the Cranleigh merchant bank, also questioned the lack of a targeted return, saying it was very unusual not to have very clear investment parameters and objective.

Little said it’s up to the fund’s board to determine what the returns are, and that will depend on what’s included in the portfolio.

"Portfolio choice will in turn influence expected returns through time,” he said.

A Treasury spokesman told BusinessDesk after the hearing that the fund will be fully operational next month, and that the required rate of return on each transaction will be assessed on its risks.

Budget documents show delays establishing the fund meant $2.5 million was expected to be spent on setting it up in the June 2019 year instead of the $4 million initially allocated. Some $2 million of funding has been pushed out into the 2020 year, with a $500,000 underspend in 2018.

Some $6 million has been allocated to cover annual operating costs, and $40 million is budgeted for investments in the June 2020 year, followed by $20 million injections in each of the following three years.

New Zealand Green Investment Finance - the incorporated entity - is chaired by professional director Cecilia Tarrant, who is joined by former banker David Woods. Living Earth founder Rob Fenwick was named an ambassador for the fund.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Survey: NZ's Appetite For Eating Insects

When it comes to eating insects, New Zealanders like them crunchy and if given a choice would opt to eat a black field cricket before other creepy-crawlies, according to a new AgResearch report that explores the nation’s appetite for insects. More>>

ALSO:

Sweden Crash: CAA Grounds 21 Aircraft Over Safety Concerns

The Director of Civil Aviation Graeme Harris, has today, Saturday 20 July, 2019 suspended the airworthiness certificates of all 21 Gippsland GA8 Airvan aircraft currently operating in New Zealand. More>>

ALSO:

Emission Statement: No New Coal Boilers For Fonterra

Fonterra is shaving eleven years off its coal target, as it announces a new commitment to reduce its reliance on coal. More>>

ALSO:

Long Time Coming: Soil Turned On Waimea Dam

After almost 20 years of planning and a 'gruelling' process to keep the project on track, the Waimea Community Dam, one of the Tasman District's largest-ever projects, is now under way. More>>