Climate change minister Simon Watts announced yesterday that New Zealand Green Investment Finance (NZGIF), the country’s largest climate-focused investor, would stop making new investments and would wind down its existing portfolio.

“Almost $400 million has been invested with very limited results and there are more than 20 other government funds operating with similar objectives to the NZGIF,” Watts said.

“Alongside this, the market for low emission investments has grown, there are more funding and financing products, and we have a more robust Emissions Trading Scheme, reducing the need for government involvement.”

Watts said the government is serious about climate change. “That’s why we have committed to doubling renewable energy, investing in technology to lower emissions while boosting productivity, and cutting barriers to green investment.

“We will prioritise actions that have the greatest impact on emissions and growth and will provide real value for money. In the current economic environment New Zealanders want assurance that taxpayer money is being well spent and delivering results. We believe NZGIF is no longer aligned to that vision.”

‘Frustrating’ - expert

However Sebastian Gehricke, director of Otago University’s Climate and Energy Finance Group, said the announcement was frustrating - and genuinely surprising.

“I would have expected NZGIF’s approach to align closely with the National Party’s economic and energy transition strategy, given that it effectively functions as a pseudo public-private partnership. The model of co-investment and crowding in private capital to support New Zealand’s renewable energy transition is a smart and efficient way to leverage government funding.

“It’s hard to see why this approach wouldn’t be championed rather than curtailed.”

Risk to climate commitments

Barry Coates, co-CEO of Mindful Money, said that NZ GIF’s role of accelerating investment into emissions reductions is still necessary and urgent. “There is still far too little capital flowing into NZ climate investments, especially into private companies.

“NZ GIF played a role in building more private sector investment through facilitation and de-risking. NZ GIF demonstrated that it can crowd in private sector investment, through playing a lead role and co-financing.”

Coates said that, while NZ GIF incurred losses in its solar energy investments resulting from the collapse of SolarZero, they built a portfolio of good investments that are showing promise in accelerating the decarbonisation of agriculture, horticulture, materials, energy and industrial production.

“It is far too early to wind down NZ GIF. This is a step backwards in the challenge to reduce New Zealand’s greenhouse gas emissions. It is yet another dismantling of initiatives that would enable the New Zealand economy to reduce its emissions, creating risks of falling short on our climate commitments and incurring liabilities for failing to meet our Nationally Determined Contributions (NDC).”

Clarity lacking

Gehricke said that if there were serious performance issues with NZGIF, they should be publicised alongside the government’s statement.

He also questioned the government’s stated reasons for scrapping the fund.

“I would really like to see the evidence for the statement ‘Almost $400 million has been invested with very limited results’. It is frustrating when such statements are made without any reference to what that means.

“In terms of crowding in private capital into our transition NZGIF seems to provide amazing results.”

Gehricke also said it was unclear what Watts means by ‘20 other government funds operating with similar objectives.’

“Some clarity and data here would be helpful. As far as I’m aware, the main other fund involved in decarbonisation projects was the GIDI fund. However, that fund, which has now been closed, focused on subsidising the transition, whereas NZGIF operates as an investor, aiming to generate financial returns for the fund and, ultimately, the Government.”

Watt’s comments about a “more robust” ETS is also questionable, with increasingly volatile secondary market prices seeing NZUs slipping further into the mid-$50s this week - well below the $70 mark experts say it needs to be to incentivise industrial decarbonisation - and more than 20% below this year’s auction floor price of $68.

Carbon News asked Watts to clarify the statements but we did not receive a response ahead of our publication deadline.

Gehricke said that Watts’ announcement appears to continue the pattern of making unsubstantiated statements to justify the weakening of climate policy, all while maintaining a narrative of strong ambition.

“A recent example of this is the consultation document on the proposed adjustments to the Climate-related Disclosures Regime, which leans heavily on anecdotal input. It includes vague phrases like ‘We have also heard...’ and ‘Some stakeholders consider...’ - hardly a solid evidence basis for regulatory change.”

Gehricke said he has yet to see a significant announcement from this Government that backs up Watts’ statement that the government will ‘prioritise actions that have the greatest impact on emissions and growth and will provide real value for money’.

“How is it that crowding in private capital—while also aiming to generate returns—is not aligned with this goal? If anything, most of the announcements and decisions I’ve seen seem to head in the opposite direction.

“The underwhelming NDC, the complacent Emissions Reduction Plan, and now this latest move all suggest a lack of ambition, not a strategic focus on impact or value.”

Enduring purpose?

NZGIF was founded in 2019 as a pillar of the then-Labour Government’s environmental strategy - a green investment bank “with an enduring purpose” to meet New Zealand's climate change goals by bringing new capital to invest in decarbonisation.

The fund launched with an initial $100 million and in the past six years has drawn hundreds of millions of dollars worth of investment by partnering with projects including horticulture, renewable energy, electric buses, and solar energy for schools.

According to the fund’s website, it has made over 30 different investments across a wide range of sectors which have an estimated lifetime emissions reduction of up to 1.6 million tonnes of CO2-e.

But the fallout around SolarZero’s collapse in November 2024, after multinational investment giant Blackrock pulled the plug on the New Zealand startup it had bought in 2022, brought tough questions from the government around NZGIF’s management of its $145m loan to SolarZero.

NZGIF chair Cecilia Tarrant resigned in December, following a six-year tenure since the start of the fund.

Liquidation complex

Gehricke says that, without knowing all the details, NZGIF’s SolarZero loan may have underperformed as the company is in liquidation. “However, that story is quite complex as some have argued the company could have continued, but Blackrock pulled the plug as the sole equity investor. There were even many stories around the unfair treatment of employees and contractors...

“Surely during the liquidation of the company some of that will be returned to the debt holder, who is senior to equity investors in the pecking order during liquidation. Unless Blackrock has found a way to extract assets without paying the debt holders."

Gehricke says there are many other examples where NZGIF brought in large amounts of private capital into “great” green projects and companies. “Focusing on one potentially failed investment is not a fair representation.

“Pretending the ETS is solving anything in its current set up, beyond incentivizing a vast amount of monocrop pine plantations, and that we therefore don't need other policies is disingenuous. 

“We can only speculate what the real reasons for this decision are, as the stated justification doesn't line up, at least not without more information.”

NZGIF has 90 days to develop a plan for ministers outlining how changes at the company will be implemented.