Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Senator for her consideration of the application of the Fossil Fuel Divestment Act to these new funds. I know this was discussed on Committee Stage.

The first amendment proposes to remove the mechanism to allow the investment to proceed where the agency is satisfied that it is in line with the achievement of the national climate objectives. Section 31(3) of the Bill and the equivalent provision inserted by the Fossil Fuel Divestment Act into the National Treasury Management Agency (Amendment) Act 2014 allow for direct and indirect investments in fossil fuel undertakings where the agency has satisfied itself on reasonable grounds that the investment is intended to be consistent with the achievement of the national climate objectives, the implementation of the State’s climate change obligations and Government policy in respect of climate change and climate change objectives. This exemption is provided for in the Bill to ensure that a proposed investment in a project is not prohibited where, in the NTMA’s view, the investment is intended to be consistent with the State’s climate change obligations and policies and with the transition to a climate-resilient, biodiversity-rich, environmentally sustainable and climate-neutral economy by the end of 2050. An example of this would be an investment in technologies that involve the refinement of certain fossil fuels with the objective of driving reductions in greenhouse gas emissions and achieving net zero emissions in connection with their use. Deleting the specific references would run counter to efforts to achieve climate change targets, which is the opposite of what is intended.

The second amendment relates to the reduction in the de minimis of investments from 15% to 1%. If the tolerance threshold is set too low, it may effectively lock the NTMA out of indirect investments as it would be difficult for the NTMA to satisfy itself on reasonable grounds that such indirect investment is unlikely to have exposure in excess of the threshold. The 15% limit specified is very much an upper ceiling. It is not a target. It is set at that level to allow for the fact that short-term factors can cause significant fluctuations in the value of assets. In practice, the target exposure is expected to be lower. As such, changing the threshold may not affect any specific company but could potentially impact on the NTMA’s ability to invest in certain pooled funds, thereby reducing the new funds’ and ISIF’s investment universe. It is important that the NTMA can invest, subject to the specific restrictions in the legislation. On this basis, I cannot accept the proposed amendments.