Last updated: 29/09/2023
At Mercer, we take our Sustainable Investment Policy into account when managing our investments, believing that a sustainable investment approach is consistent with an objective of creating and preserving long-term investment capital and, consequently, that a sustainable investment approach is in the best interests of our investors.
Mercer NZ’s Sustainable Investment Policy is guided by:
- Our fiduciary responsibilities
- Compliance with the laws of New Zealand
The Sustainable Investment Policy forms part of our investment governance framework and it provides an overview of the key principles and approaches governing sustainable investment, which include:
- Environmental, Social and Corporate Governance (ESG) Integration
- Sustainability Themes
- Climate Change
- Active Ownership
Refer to the Sustainable Investment Policy for more information about these principles and approaches.
Mercer also publishes a Sustainable Investment Report which provides a summary of sustainable investment activity.
Exclusions for the Mercer Investment Trusts New Zealand, Mercer Investment Funds and Mercer Wholesale Funds
In broad terms, Mercer NZ’s application of exclusions (as described below) is generally determined by the nature of our holdings, including through related entities or third parties. Specifically, whether the holdings are “direct” or “indirect”.
- Direct Holdings generally mean securities held directly by our custodian under an Investment Management Agreement (IMA) arrangement with an investment manager. Exclusions mainly apply to direct security holdings within mandates.
- Indirect Holdings generally mean securities held within a CIV, derivative, exchange traded vehicle or other structure where the underlying securities are not directly held by our custodian and we do not control the way assets are managed. Mercer does not control whether its exclusions are applied to Indirect Holdings.
As an overarching principle, Mercer NZ prefers an integration and engagement-based approach to sustainable investing rather than an exclusions-based approach. There are however, a limited number of instances in which we apply exclusions. Mercer NZ’s approach to “exclusions” involves seeking to not invest, as well as removing or reducing exposure as much as practicable in certain companies that are involved in products or activities that we determine the Funds should not have exposure to.
We consider that exclusions should be a last resort because, once divested, Mercer NZ loses its shareholder rights and thereby the ability to influence the behaviour of companies.
The reasons to exclude certain securities are typically due to factors that make continuing to invest untenable.
These factors include but are not limited to: investment beliefs, risk management considerations, expected social impact or level of harm, public policy position, societal norms, investor expectations, efficacy of other approaches (such as engagement), ability to influence and expected impact on portfolio returns.
While Mercer NZ may invest in assets related to the broad categories discussed below, the following specific exclusions apply to the Direct Holdings (but not necessarily Indirect Holdings) of the Funds (‘Exclusions Criteria’), unless exceptions (noted below) or other factors beyond Mercer NZ’s control mean they are not possible to apply:
- Controversial weapons companies, means 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 (regardless of revenue).
- are involved in the production and retailing of automatic or semi-automatic civilian firearms and ammunition (regardless of revenue).
- Tobacco companies, means companies that:
- are involved 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 nicotine vaping products (such as ‘vaping’ devices and e-cigarettes).
- derive 50% or more of their gross revenue (or, where gross revenue figures are not available, net revenue) from tobacco-related business activities such as packaging, distribution and retailing.
- Russian assets, defined as:
- Sanctioned Russian entities and related entities of sanctioned entities;
- Equity – issues of publicly held companies with Russia as the country of incorporation and where the security has a primary listing in Russia (including ADRs/GDRs), plus subsidiary mapping;
- 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.
The Exclusions Criteria above applies to Mercer NZ’s Direct Holdings in trans-tasman shares, international shares, growth fixed interest, defensive fixed interest, real assets and alternatives asset classes.
Socially responsible and ethically-labelled funds
The Additional Exclusions listed below apply to the Direct Holdings (but not necessarily the Indirect Holdings) in the schemes’ socially responsible and ethically-labelled funds, unless exceptions (noted below) or other factors beyond Mercer NZ’s control mean they are not possible to apply.
The Additional Exclusions listed below are applied to Equities and Global Credit asset classes to exclude investments in alcohol, gambling, adult entertainment, and fossil fuels within certain revenue thresholds.
Other Fixed Income, Overseas Sovereign Bonds and New Zealand Sovereign Bonds asset classes do not have the below Additional Exclusions.
These Additional Exclusions are defined as:
- Companies that are involved 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
- 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 coal, oil or gas.
Where referred to above, ‘coal, oil or gas’ includes these fuels where derived from unconventional sources such as tar sands or shale. However, metallurgical coal is not included in the term “coal”.1
- Companies with more 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).
- Companies with more 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).
- Companies with more 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).
- Companies involved in the development and production of depleted uranium ammunition/armour.
Revenue is based on the latest reported company financial year end. Net revenue is used where gross revenue is unavailable.
The Exclusions Criteria and Additional Exclusions listed above are current as at 29 September 2023 and changes may occur from time to time. Any changes will be shown here.
As a shareholder of publicly listed companies, Mercer NZ has the right to vote at shareholder meetings and regards voting our shares as an important fiduciary responsibility.
Mercer NZ engages the services of a third-party proxy advisor to provide proxy voting research and facilitate the collation and reporting of proxy voting data. Mercer NZ’s proxy voting records, where available, can be found here and are updated semi-annually.
Additional information about Active Ownership is noted in the Sustainable Investment Policy.
We are proud that the following funds have been externally certified by Responsible Investment Association Australasia (RIAA)2, an organisation that operates the world’s first certification programme for responsible investment products.
- Mercer Ethical Leaders Conservative Fund
- Mercer Ethical Leaders Balanced Fund
- Mercer Ethical Leaders Growth Fund
- Mercer Ethical Leaders NZ Shares Fund
- Mercer Ethical Leaders Global Shares Fund
- 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 ethically-labelled Mercer Investment Funds can be viewed here. The portfolio holdings for the remaining Mercer Investment Funds are available via the Disclose Register.
For more details you can contact us via email firstname.lastname@example.org.
1 ISS ESG definitions as follows: ‘Metallurgical/coking coal’ designates the various grades of coal suitable for carbonisation to make coke for steel manufacture. Metallurgical coal has a particularly high heating value and a low ash content. ‘Thermal/steam coal’ designates coal used by power plants and industrial steam boilers to produce electricity or process steam. It generally has a lower heat content and a higher share of volatile matter than metallurgical coal.
2 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.