Environmental, social & governance policies

 

Sustainable Investment 

 

Last updated: 01/12/2025

 

At Mercer New Zealand, we take our Sustainable Investment Policy into account when managing our investments, believing that sustainable investment approaches are consistent with an objective to create and preserve long-term investment capital, where relevant and aligned with achieving investment objectives. 

Our Sustainable Investment Policy is informed by our global philosophy and principles, link here, and our local experience implementing and evolving our sustainable investment approach for over a decade.

We have principles to guide our implementation approach, summarised into four techniques:

  • Integration of environmental, social and governance (ESG) factors in relevant investment decisions may potentially enhance portfolio resilience. This includes appointing third party investment managers (Investment Managers) who assess and reflect ESG risks and opportunities when they select investments and construct their portfolios.
  • Stewardship, via engagement with Investment Managers, companies and policymakers and/or via proxy voting at listed company annual general meetings, may improve investment outcomes by leveraging investor rights and influence. Engagement may be undertaken with companies or policymakers via Investment Managers, collaborative initiatives and/or directly by us.
  • Exclusions that seek to avoid investment in, or remove exposure as much as practicable to, certain companies or securities with involvement in defined products or business activities may help respond to stakeholder expectations where integration and stewardship are considered to be insufficient.  
  • Investment in themes, which is only applicable to the funds which invest in Sustainable Funds (refer to the Sustainable Investment Policy section on Investment in Themes), may provide additional opportunities to improve risk-adjusted returns.

Refer to the Sustainable Investment Policy for more information about these principles and implementation techniques.

Mercer New Zealand also publishes a Sustainable Investment Report which provides a summary of sustainable investment activity.

 

Exclusions
 

For the Mercer Investment Trusts New Zealand (MITNZ), Mercer Investment Funds and Mercer Wholesale Funds.

Exclusions involve seeking to avoid investing in, or removing exposure as much as practicable to, certain companies with involvement in defined products or business activities.

Exclusions can be used to respond to evolving societal norms and expectations, including New Zealand Government policy positions, especially where Integration and Stewardship are considered to be insufficient or not applicable. 

Exclusions are typically implemented as rules-based, pre-defined criteria such as the Exclusions Criteria set out below.

Our application of exclusions is generally determined by the asset class and nature of the holdings, and are subject to the operational limitations and exceptions detailed below.

Exclusions only apply to Directed Investments*. If a Directed Investment meets an Exclusions Criteria, our Investment Managers will generally be expected to divest the Directed Investment in a reasonable period of time, typically within 10 business days and as market conditions allow. We may rely on specialist third party ESG providers and their methodologies for implementation, including determining which securities are required to be excluded based on the relevant Fund’s Exclusion Criteria (see below)

* Please refer to the Sustainable Investment Policy for a definition of Directed Investments

Exclusions Criteria

Investment Managers are required to apply the following exclusions to the Directed Investments of the Funds (‘Exclusions Criteria’), unless an operational limitation or exception as noted below, or other factors beyond our reasonable control, mean it is not reasonably feasible or it would be impracticable to apply the exclusions. 

Exclusion 

Exclusions Criteria 

Controversial weapons 

Companies that manufacture whole weapons systems, or delivery platforms, or key components that were developed or are significantly modified for use in cluster munitions, anti-personnel landmines, biological or chemical weapons or nuclear weapons. 

Companies with involvement* in the production or retailing of automatic or semi-automatic civilian firearms or ammunition.

Tobacco 

Companies with involvement* in the production of tobacco, manufacture of nicotine alternatives or tobacco-based products (regardless of revenue), including subsidiaries and joint ventures. Nicotine alternatives and tobacco-based products include, for example, nicotine vaping products such as ‘vaping’ devices and e-cigarettes. 

Any other company that derives greater than 50% of revenue^ from tobacco-related distribution, wholesale or retail, and services such as marketing or supplying products necessary for production.

Russian assets#

Defined as:  

  • Sanctioned Russian entities and related entities of sanctioned entities;  
  • Shares – issues of publicly held companies with Russia as the country of incorporation or where the security has a primary listing in Russia (including ADRs/GDRs), including their subsidiaries  
  • Fixed income – issuers captured in equity screening (as above) by country of incorporation, plus Russian sovereign bonds and bonds issued by Russian government-related entities (Rouble or foreign currency denominated); 
  • Cash holdings in Russian currency;  
  • Russian FX exposure;  
  • Private markets assets domiciled in Russia;  
  • All secondary issues of excluded securities; and 
  • Derivatives having a Russian asset as primary exposure.

* Involvement is determined by a third party ESG research provider, currently ISS ESG, typically assessed based on revenue derived from defined activities (no revenue thresholds) or in the case of expansion metrics assessed based on capital expenditure.  Mercer may change the third party ESG research provider and/or change the scope of its role from time to time.

^ Revenue is gross revenue in the last full financial year or, where not available, net revenue based on available company filings. Mercer may change the third party ESG research provider and/or change the scope of its role from time to time.

# Mercer New Zealand has instructed its investment managers to divest any existing exposure to Russian securities as market conditions allow and to prohibit any new investments in Russian securities. This may mean that some Funds still retain exposures to Directed Investments in Russian securities, as Mercer New Zealand seeks to divest in a manner that promotes the best interests of investors.

Additional Exclusions Criteria

Further to the exclusions listed in the Exclusions Criteria section above, additional exclusions also apply for the Responsible and Sustainable Funds (listed in Appendix A of the Sustainable Investment Policy).   

Applying Additional Exclusions Criteria may affect investment risks and returns where, for example, there are exclusions to investments in companies that are not typically excluded in other funds. If those excluded companies perform well or poorly in certain time periods, there may be differences in return outcomes compared to a benchmark or comparable fund where those exclusions are not applied.

The Additional Exclusions listed below apply to the Directed Investments of some asset classes – equities, global bonds and global credit – for the Responsible labelled Mercer Investment Funds and the Responsible and Sustainable labelled MITNZ portfolios, as applicable (‘Additional Exclusions’) within certain revenue thresholds, unless exceptions (as noted below) or other factors beyond Mercer New Zealand’s control mean they are not possible to apply.

Other Fixed Income, Overseas Sovereign Bonds and New Zealand Sovereign Bonds asset classes do not have the below Additional Exclusions.  

These Responsible Additional Exclusions for Responsible labelled Equities and Global Bonds are defined as:

Responsible Additional Exclusions

Additional Exclusions Criteria for Responsible labelled Equities and Global Bonds

Coal, oil, or gas

Companies with involvement* in the following as defined by Global Industry Classification Standard (GICS) sub-industry: 

  • Oil & Gas Drilling  
  • Oil & Gas Equipment & Services  
  • Integrated Oil & Gas  
  • Oil & Gas Exploration & Production  
  • Thermal Coal & Consumable Fuels.   

Companies that own proved or probable reserves in coal, oil, or gas; and derive in excess of 15% of their revenue^ from exploration and extraction of thermal coal, oil or gas.  

Where referred to above, ‘coal, oil or gas’ includes these fuels where derived from conventional and unconventional sources such as tar sands or shale. 

Adult entertainment

Companies with greater than 10% of revenue^ from adult entertainment-related business activity (adult entertainment-related activities mean production, distribution and not accessible to minors as defined by third-party data provider).   

Alcohol

Companies with greater than 10% of revenue^ from alcohol-related business activities (alcohol-related activities mean production, distribution and services to the production of alcoholic beverages alcohol as defined by third-party data provider).   

Gambling

Companies with greater than 10% of revenue^ from gambling-related business activities (gambling-related activities mean production, services and distribution of gambling products as defined by third-party data provider).   

Depleted uranium

Companies with involvement* in the development or production of depleted uranium ammunition/armour.

^ Revenue is gross revenue in the last full financial year or, where not available, net revenue based on available company filings.

These Sustainable Additional Exclusions apply and are limited to the Mercer Sustainable Global Credit portfolio in the MITNZ as well as those portfolios which invest into this portfolio being the Mercer Responsible diversified portfolios in the MITNZ (Conservative, Moderate, Balanced, Growth and High Growth) and the Mercer Responsible Balanced Fund in the Mercer Investment Funds.

Sustainable Additional Exclusions

Additional Exclusions Criteria for Sustainable Global Credit

Nuclear weapons

Companies with involvement* in the development or production of nuclear weapons.

Depleted uranium

Companies with involvement* in the development or production of depleted uranium ammunition/armour.

Tobacco

Companies that derive greater than 10% of revenue^ from tobacco-related distribution, wholesale or retail, and services such as marketing or supplying products necessary for production.

Cannabis

Companies that derive greater than 10% of revenue^ from cannabis (medicinal or recreational) production, distribution or services. 

Saudi Arabia

Saudi Arabian securities, defined by country of incorporation or where the security has a primary listing in Saudi Arabia, including subsidiaries.  

Adult entertainment,
Alcohol and
Gambling

Companies with a material exposure to adult entertainment, alcohol or gambling, where materiality is defined as greater than 10% of revenue^ from production and/or distribution, wholesale or retail, and services such as marketing or supplying products necessary for production.

Live animal exports

Companies that derive greater than 10% of revenue^ from live animal export for the purpose of selling live animals for slaughter, husbandry and breeding subjects, including specialised transportation services specifically designed to facilitate live exports.

Animal fur production

Companies that derive greater than 5% of revenue^ from fur production.

Thermal coal mining

Companies that derive greater than 5% of revenue^ from thermal coal mining.

Oil sands production

Companies that derive greater than 5% of revenue^ from oil sands production.

Fossil fuels

Companies that own proved or probable reserves in coal, oil or gas and derive greater than 15% of revenue^ from exploration and/or extraction of coal, oil, or gas; or companies with a primary business activity in any of the excluded sub-sectors below:

  • Oil & gas drilling
  • Oil & gas equipment & services
  • Integrated oil & gas
  • Oil & gas exploration & production
  • Thermal coal & consumable fossil fuels.

Where referred to above, ‘coal, oil or gas' includes fuels derived from conventional and unconventional sources such as tar sands or shale.

*Involvement is determined by a third party ESG research provider, currently ISS ESG, typically assessed based on revenue derived from defined activities (no revenue thresholds) or in the case of expansion metrics assessed based on capital expenditure. Mercer may change the third party ESG research provider and/or change the scope of its role from time to time.

^ Revenue is gross revenue in the last full financial year or, where not available, net revenue based on available company filings.

The Exclusions Criteria and Additional Exclusions listed above are current as at 1 December 2025 and changes may occur from time to time.  Any changes will be shown here.  

Stewardship approaches

As a shareholder of publicly listed companies, Mercer New Zealand has the right to vote at shareholder meetings and regards voting our shares as an important aspect of Mercer NZ’s sustainable investment approach. For unlisted companies, voting may be undertaken where we have an Advisory Board seat or have certain voting rights in specific funds or individual assets. Stewardship via voting is not applicable for unlisted real assets (i.e. directly held property and infrastructure).

Mercer New Zealand engages the services of a third-party proxy advisor to provide proxy voting research and to facilitate the collation and reporting of proxy voting data which Mercer New Zealand uses to monitor Investment Manager voting. Our ability to directly monitor and report on proxy voting only applies to Directed Investments. Mercer New Zealand’s proxy voting records (to the extent that these are available e.g. for Directed Investments) can be found here and are updated on a six-monthly basis, within three calendar months of the end of the reporting period and show the prior twelve months. Please select Mercer NZ from the regions drop down menu.

Additional information about Stewardship approaches are noted in the - Sustainable Investment Policy.

RIAA Certification

We are proud that the following funds in the Mercer Investment Funds have been externally certified by Responsible Investment Association Australasia (RIAA)1, an organisation that operates the world’s first certification in the Mercer Investment Funds programme for responsible investment products.

  • Mercer Responsible Balanced Fund
  • Mercer Responsible Trans-Tasman  Shares Fund
  • Mercer Responsible Global Shares Fund
  • Mercer Responsible Hedged Global Fixed Interest Index Fund

Other Information

  • Scheme documents such as Product Disclosure Statements, Statement of Investment Policy and Objective, Information Memorandums and Investment Guidelines are available under the Documents tabs at the following links:

  • Portfolio holdings for the Responsible labelled funds in the Mercer Investment Funds can be viewed - here. The portfolio holdings for the remaining Mercer Investment Funds are available via the Disclose Register.
  • The Mercer Investment Funds is a managed investment scheme. Mercer (N.Z.) Limited is a climate reporting entity (CRE) and is therefore required to publish annual climate-related disclosures for all registered managed investment schemes for which they act as manager. You can access the latest climate-related disclosures at crd-app.companiesoffice.govt.nz or at the following link: Mercer NZ Climate Statement.
  • View the Net Zero Target document here.

Contact Us

For more details you can contact us via email nzportfolios@mercer.com.

1 The Responsible Investment Certification Program does not constitute financial product advice. Neither the Certification Symbol nor RIAA recommends to any person that any financial product is a suitable investment or that returns are guaranteed. Appropriate professional advice should be sought prior to making an investment decision. RIAA does not hold an Australian Financial Services Licence and does not hold a Financial Services Provider Licence in New Zealand . RIAA’s RI Certification Symbol signifies that a product or service offers an investment style that takes into account environmental, social, governance or ethical considerations. The Symbol also signifies that the listed Mercer Investment Funds adhere to the operational and disclosure practices required under the Responsible Investment Certification Program for the category of Product. The Certification Symbol is a Trademark of the Responsible Investment Association Australasia (RIAA). Detailed information about RIAA, the Symbol and the Mercer Investment Funds’ methodology, performance and stock holdings can be found at www.responsiblereturns.com.au, together with details about other responsible investment products certified by RIAA..