The investment arm of Westpac Bank NZ is committing up to $300m to sustainable investments that adhere to strict global standards.
BT Funds Management NZ (BTNZ), which oversees the bank's KiwiSaver and investment activity, will allocate the assets to to a global shares index that meets the EU Paris climate regulations, which includes reducing greenhouse gas emissions by 1.5 degrees.
BNTZ head of investment solutions Philip Houghton-Brown said its initial investment of $200m in the index was expected to rise to $300m in six months time.
"We're working to align our entire portfolio with our climate objective of a 1.5 degree C pathway, increasing exposure to climate solutions, decreasing climate risks, and supporting ecosystem, biodiversity, pollution prevention and water stewardship.
"New Zealanders are increasingly vocal about wanting to invest in funds that align with their social and environmental principles. They want action and less talk around sustainability issues."
The money would also be invested in companies with strong environmental, social and governance ratings, otherwise known as ESG.
The index had been designed in partnership with global asset manager Legal & General (L&G) who would also manage it.
Houghton-Brown said the profile of greenhouse gas emissions in the index was 50 percent lower than the equivalent world sharemarket index, and would further reduce emissions by a rate of 7 percent a year to align with the 1.5 degree reduction goal.
He said the index would exclude companies that are the worst climate and social offenders, including fossil fuels, weapons, tobacco and predatory lending.
"Under their Climate Impact Pledge, each year L&G publicly announce divestments from companies that are not meeting minimum climate standards."
The Westpac Bank had issued cheap, sustainability-linked loans to power company Genesis and farming company Pamu in the past two weeks.