One of Australia’s largest industry super funds has committed to ensuring its investment portfolio has a net zero emissions footprint by 2050, as it works to align its investment strategy with the Paris Agreement.
HESTA, the industry super fund for workers in health and community service sectors, manages around $52 billion in members retirement assets, and says it is necessary that it incorporates the potential impacts of climate change. As superannuation funds are designed to manage retirement savings of members, potentially over a period several decades, long term financial risks like climate change become an important risk management consideration.
The zero net emissions commitment forms part of a larger Climate Change Transition Plan launched by Hesta on Friday, which will also include a goal of reducing the ‘absolute’ carbon footprint of its investment portfolio by 33 per cent by 2030.
“Our Climate Change Transition Plan is set to be one of the most comprehensive of its kind undertaken by a superannuation fund, mapping out how we’re going to manage climate risk, align our actions to a below-two-degrees world and support the transition to a low-carbon economy,” Hesta CEO Debby Blakey said.
“Climate change presents a financial risk to the HESTA investment portfolio and the world in which our members will retire. An urgent response is required and the actions within the Climate Change Transition Plan have been thoughtfully and carefully designed to provide an effective and tangible response.”
A similar commitment to a net zero emissions goal announced on Thursday by the Australian Energy Council, which represents Australia’s largest energy companies, and which has been met by anger from some members.
Electricity generator InterGen, which operates the Callide C and Millmerran coal fired power stations in Queensland, has issued a furious complaint that the zero emissions target would only antagonise the Morrison government.
“It is surely the remit of the AEC to work with rather than against government to enable sensible, achievable and successful technology decisions to be made about 2030 never mind 2050?” InterGen managing director Brent Guthner said in an email to Australian Energy Council chief executive Sarah McNamara, as reported by The Australian.
“It is not good enough to give as a reason others want this net-zero 2050; nor that officials and MPs support it. Some do but many don’t,” Guthner wrote.
HESTA said that its updated investment approach would include both the setting of targets to reduce its exposure to climate change related risks, as well as seeking out new opportunities to invest in low-carbon opportunities.
“This is an exciting piece of work that reaffirms our ongoing commitment to leadership in responsible investment and can help protect and enhance the long-term performance of our members’ investments, while driving meaningful change and contributing to a healthier planet and society,” Blakey added.
HESTA has over 860,000 members, mostly from the health services sector. As is the case for many of Australia’s largest superannuation companies, much of HESTA’s investment portfolio consists of shares from across Australia’s largest publicly listed companies. This approach means that many super funds are invested in some of Australia’s largest fossil fuel companies.
According to climate change investor advocacy group Market Forces, around 9 per cent of HESTA’s core super fund consists of companies “actively undermining the goals of the Paris Agreement”, including Woodside Petroleum, Origin Energy, and BHP.
HESTA has committed to actively monitoring and providing annual reports on the progress it is making towards reducing the emissions footprint of its investment portfolio.
It may require HESTA to divest itself of the more emissions intensive companies in its investment portfolio.
“If efforts to improve the current trajectory of global warming are not successful, then we can expect an increase in the severity and frequency of damage from the physical impacts of climate change. There is no doubt that the social, environmental and economic cost of inaction is going to be far greater than the cost of responding to climate change,” Blakey added.
The announcement follows the release of new scenario modelling from a collective of the world’s central banks, including the Reserve Bank of Australia, under the ‘Network for Greening the Financial System’ banner.
The scenario modelling is intended to aid financial regulators and investment managers to assess and mitigate the recognised financial risk posed by climate change.
“Financial regulators are now responding to this economic risk, as are institutional investors who are increasingly wary of carbon-intensive assets and looking for opportunities that will accelerate the net-zero emissions transition,” Investor Group on Climate Change CEO Emma Herd said in response to the release of the modelling.
“A transition is inevitable. Early action reduces the cost of the transition to net-zero emissions by 2050 substantially and helps avoid severe and irreversible impacts from climate change itself.”