KEY POINTS:
One of the world's biggest asset managers is urging investors to take climate change into account even if they do not believe in it.
But that could mean investing in nuclear solutions, an issue New Zealand's Government funds are now wrestling with.
AllianceBernstein, a US listed firm which manages more than US$800 billion around the world, including money in New Zealand, has released a report predicting how climate change will affect companies and the consequences for investors.
In the report, it backs investment in clean coal and nuclear energy.
AllianceBernstein says a groundswell in public sentiment is spurring both voluntary and mandatory efforts around the world to reduce greenhouse gases and any new regulation is likely to have a profound affect for companies across a wide range of industries.
"Even investors not convinced by the scientific case for man-made climate change, can no longer afford to ignore the global push to contain greenhouse gases because it will affect trillions of dollars of investment flows over the next two decades," it states.
And it warns investors not to wait to take them into account.
"Investors may be tempted to wait until these developments are more mature. We think that would be a mistake. Investors who hold off too long may miss large opportunities to profit from investments in companies benefiting from the developments we foresee - and may invest in other companies that will be hurt."
Rodger Spiller, New Zealand head of the Australasian responsible investment association, says climate change is an issue which New Zealand firms should be taking into account but have been slow to do so.
"It's something we expect institutional investors to be thinking about but it has been slow to take off.
"It is only recently we have seen new KiwiSaver funds come on to the market which cater to that."
Spiller believes the slow change is the result of a chicken and egg situation - providers won't offer products which take responsible investment factors into account unless investors demand it and investors don't want it until they are offered the chance to invest in it.
The debate over what to invest in and what to avoid is also still to be tackled by major crown businesses which are involved in investment.
The Crown's financial institutions are governed by a policy which means they may not invest in companies which could prejudice New Zealand's reputation.
But its interpretation is left up to the individual Crown bodies to determine.
New Zealand Superannuation Fund head of responsible investment Anne-Maree O'Connor says choosing to divest from a company is a difficult choice particularly if only a small part of its business is involved in an area which is considered to be controversial.
The Accident Compensation Corporation recently decided to pull out of investing in companies involved in making nuclear weapons while the the Super Fund is still considering its policy. Both have already pulled out of investing in tobacco companies. The Super Fund is also expected to stop investing in companies which make cluster bombs.
Super Fund chief executive Adrian Orr recently told a conference for socially responsible investment that it was not about making the public feel good.
But with companies such as those involved in the tobacco industry, the only ethical approach would be to ask the company to stop making cigarettes - a move which would be detrimental not only to the company but to the fund as a shareholder.
But Green Party co-leader Russel Norman, who has been pushing for the Super Fund to stop investing in nuclear related companies for more than a year, says it is not that hard.
He believes any company which makes parts used solely for the manufacture of nuclear weapons or to service nuclear weapons should be excluded.
