Imported Layers Created using Figma Group Created using Figma Shape Created using Figma Shape Created using Figma Imported Layers Created using Figma Shape Created using Figma Shape Created using Figma Imported Layers Created using Figma Path Created using Figma logo Created using Figma “ Created using Figma Group Created using Figma

Harbour Navigator: Decarbonisation progress – more than hot air?

Jorge Waayman | Posted on Aug 9, 2023
  • New Zealand’s emissions have not been falling despite the rising number of climate commitments, but there have been some encouraging examples of action from large emitters in the market.

  • Fletcher Building has developed the country’s lowest carbon cement through substituting coal in the production process with alternative fuels, such as used tyres and construction waste.

  • Contact Energy is investing significantly in new renewable energy generation whilst also transitioning away from its fossil fuel generation in an orderly manner.

  • Fonterra is progressing towards exiting coal use through conversions of its boilers to biomass fuel sources, aided by government funding. The company is also investigating solutions for reducing methane emissions.

Aotearoa has seen a growing awareness and ambition towards mitigating the effects of climate change over the past few years with many targets adopted by the Government and corporates alike. However, from an aggregate standpoint, the country’s emissions have not been trending in the right direction with gross emissions being broadly unchanged since 2006.[i] Getting on track will require the right policy settings in place to encourage climate action and a collective effort across companies in several sectors to take leadership and pursue low carbon solutions. We decided to take a closer look at how some of the largest listed companies in New Zealand are progressing towards their climate goals.

Fletcher Building

Although the company operates in a high-emitting industry (building materials), it has made an ambitious commitment to achieve a science-based emissions reduction target that has been backed up by tangible action thus far. One of the key initiatives the company has implemented is an innovative solution in the cement manufacturing process. Fletcher Building undertook a project to reduce the carbon involved in cement production by using alternative fuels such as used tyres and construction waste. This means that less coal is used to produce the cement with the added benefit of diverting waste from landfill, helping the transition to a circular economy. This project has been successfully implemented at Golden Bay Cement in Portland, Whangarei, where the company now substitutes half of its coal with alternative fuels and has diverted over 80,000 tonnes of waste from landfill.[ii] This has put the company in a good position to meet its science-based target with a 12% total emissions reduction already observed relative to its base year (2018). It also means the end-product of this process, a cement labelled ‘EcoSure’ has lower embodied carbon compared to other alternatives in the market, which helps the company’s customers improve the sustainability of their projects.

Contact Energy

The company is predominantly a provider of renewable energy through its hydro and geothermal assets but does also derive a small proportion of its revenue from gas. Contact is investing heavily in increasing its renewable generation capacity with the Tauhara geothermal project in progress, expected to deliver a significant amount of new clean energy each year. This new baseload generation (which is also expected to be expanded over time given the high-quality resource) will displace or marginalise industry thermal base load generation – principally Genesis Energy’s Huntly plant but also Contact Energy’s own thermal fleet. Contact has set a science-based target, both short and long term and are regarded to be on track for a 1.5⁰C trajectory.[iii]

Aside from scaling up its renewable energy capacity, Contact is also closing down some of its fossil fuel assets such as the Te Rapa power station as mentioned in our prior article[iv], leading to substantial emissions reductions over the long term. The company’s strategy is to fully retire its baseload gas generation in an orderly manner but retain its peaker plants over the medium term to assist the transition without threatening stable, affordable electricity supply. With these planned closures, Contact’s emissions are projected to be reduced by approximately 70% over the next ten years.[v]


Fonterra is one of the country’s largest emitters, especially when accounting for the considerable on-farm emissions along the supply chain. The company has recently upgraded its emissions reduction targets for its manufacturing sites, aiming to halve its emissions by 2030 and achieve net zero by 2050. It has also committed to not increasing its net greenhouse gas emissions from dairy farming by 2030. In terms of tangible action, Fonterra has begun transitioning the boilers at its milk processing plants from coal to more sustainable fuel sources like biomass in the form of wood pellets. Examples include the conversions at its Te Awamutu and Brightwater sites, with others at the Stirling and Waitoa sites in progress. This represents a shift away from coal use and is aligned to the company’s goal to stop using coal by 2037. [vi]

Regarding Fonterra’s farming footprint, it is investing in R&D related to natural ways of reducing methane emissions from cows in collaboration with specialist research organisations. For example, the creation of new fermentations (‘Kowbucha’) could lead to inhibiting bugs that generate methane in cows. Admittedly, it is still early days for the adoption of these solutions and time will tell whether these will be able to be rolled out in practice at a scale that will meaningfully contribute to curbing agricultural emissions.

The role of government

While there may be debate amongst investors and consumers about the speed at which companies are progressing towards their climate targets, there is no doubt there is significant action taking place that is pushing us in the right direction.

The NZ Government is also supporting this action through allocating capital via the Government Investment in Decarbonising Industry (GIDI) Fund. The GIDI Fund is part of the Government’s Climate Emergency Response Fund and is funded through proceeds from the Emissions Trading Scheme.

One of the key initiatives being co-funded by the Government through the GIDI Fund is NZ Steel’s Glenbrook site project. The project involves installing an electric arc furnace to replace roughly half the coal-fired steel making. This new furnace is expected to be operational in 2027 and will deliver an average reduction of 800,000 tonnes of CO2-e per annum, the equivalent of taking 300,000 cars off the road. The GIDI fund will contribute up to $140m towards the total expected $300m of capital and transition costs with NZ Steel taking care of the rest.[vii]

Fonterra has also been one of the main beneficiaries of this funding with a recent announcement that $90m would be allocated to co-fund its emissions reduction initiatives, enabling the company to strengthen its climate target and accelerate its decarbonisation plan. This funding would cover a mixture of biomass and electricity fuel switching and energy efficiency projects across six of the company’s manufacturing sites and deliver 2.1m tonnes of earlier CO2-e reductions, the equivalent of taking 120,000 cars off the road.

Aside from government incentives, market mechanisms like the Emissions Trading Scheme will play a key role in penalising large emitters and incentivising emissions reductions, particularly when the scheme is appropriately structured following the current review by the Government.

Despite some policy uncertainty, we are already seeing companies (like the examples above) proactively tackling the climate challenge and developing initiatives that are not only needed to  deliver solid environmental outcomes, but also better economic outcomes for investors. In our view, this has been a good start, but companies will need to do more if they are going to capitalise on emerging climate opportunities and capture the economic benefits of decarbonisation.



This publication is provided for general information purposes only. The information provided is not intended to be financial advice. The information provided is given in good faith and has been prepared from sources believed to be accurate and complete as at the date of issue, but such information may be subject to change. Past performance is not indicative of future results and no representation is made regarding future performance of the Funds.  No person guarantees the performance of any funds managed by Harbour Asset Management Limited.

Harbour Asset Management Limited (Harbour) is the issuer of the Harbour Investment Funds. A copy of the Product Disclosure Statement is available at Harbour is also the issuer of Hunter Investment Funds (Hunter). A copy of the relevant Product Disclosure Statement is available at Please find our quarterly Fund updates, which contain returns and total fees during the previous year on those Harbour and Hunter websites. Harbour also manages wholesale unit trusts.  To invest as a wholesale investor, investors must fit the criteria as set out in the Financial Markets Conduct Act 2013.


[i] New Zealand's Greenhouse Gas Inventory 1990–2021 snapshot | Ministry for the Environment

[ii] Golden Bay Cement launches New Zealand's lowest GP cement | Fletcher Building

[iii] Fossil Fuel Investment in Transition or in Denial? - Mindful Money

[iv] Contact’s closure cuts carbon » Harbour Asset Management

[v] Capital Markets Day 2023 Presentation - NZX, New Zealand’s Exchange

[vi] Getting out of coal (

[vii] Approved GIDI projects | EECA