Aussie super funds ramp up climate investing efforts
Following last week’s launch of ‘Climate League 2030’, an Australian investor-led emission-reduction initiative, superannuation funds and other institutions have outlined how they are allocating capital and ramping up their activity on this front.
The initiative is driven by 16 institutional investors with combined assets under management of A$850 billion ($596 billion) and was instigated by the Sydney-based Investor Group on Climate Change (IGCC). The organisations include Aware Super, Australian Ethical, AustralianSuper, Cbus, Hesta, IFM Investors, Local Government Super, QIC, UniSuper and VFMC.
Asset manager IFM’s director of responsible investment, Chris Newton, told AsianInvestor: “We believe it’s in the financial interests of our investors and their members that we have a plan to address the risks of climate change. We already factor climate change risk into all of our investment decisions.”
GOING NET ZERO
Construction industry fund Cbus has set medium- and long-term emissions targets, including a commitment to a 45% reduction in portfolio emissions by 2030 and net zero emissions by 2050.
“This follows our previous 2018 commitment of net zero emissions for our property portfolio by 2030,” CIO Kristian Fok told AsianInvestor. “We are now developing pathways for every asset class to reach these targets.”
Cbus has a dedicated responsible investment team, led by Nicole Bradford, and it integrates climate change research across each of the sector and direct investing teams.
The fund's climate-related investments include a dedicated $500 million allocation to climate change solutions and a range of infrastructure assets, such as renewables.
Moreover, Cbus has identified opportunities for investing in low-carbon, and net-zero-emission assets in Australia – they include companies that are developing technology to enable change and more energy-efficient outcomes.
UniSuper CIO John Pearce supports such thinking: “It is important that we get users of fossil fuels as well as supporting industries to look for technologies that can help their business be resilient in a low-carbon world.”
LISTED EQUITY FOCUS
To do that, Unisuper is focusing on public equity investments. It has not prioritised climate change-related alternative investments, said Pearce, “as the opportunities in the unlisted space can be niche, may not become commercial and have a higher administrative burden – and higher fees – to identify and assess”.
Focusing on public equity investment certainly makes sense. Listed companies are responsible for 40% of Australian emissions, said IGCC chairman Stephen Dunne. Moreover, infrastructure has been linked to 70% of domestic greenhouse gas pollution.
Some investors are in the vanguard when it comes to environmental protection, and have been for some time.
Super fund Australian Ethical has factored climate change into its investment approach since its inception in 1986, with exclusions for coal and oil. In 2014 it set a target of net-zero emissions by 2050 for its portfolio and aims to achieve it through ethical investment, engagement, advocacy and transparency.
“We won’t invest in oil, gas or coal companies,” Stuart Palmer, head of ethics research, told AsianInvestor. “We invest in renewable energy, battery and other energy storage, and energy-efficiency technologies. We invest in plant-based protein and nutrition rather than higher-emissions animal agriculture.”
GREEN HYDROGEN
Specifically, he sees green hydrogen as a big investment opportunity in Australia.
“Australia has enormous solar and wind comparative advantage, which it can use to produce zero-emission hydrogen fuel,” Palmer told AsianInvestor. “Australia can export green hydrogen as well as use it locally a fuel source for a green steel export industry, for vehicles and for electricity generation.”
For its part, IFM has made investments in renewable energy and other emission-reduction initiatives, including a 12 megawatt solar farm being built to supply some 15% of Melbourne Airport’s electricity consumption.
The seriousness with which Australia’s big investors are taking the climate change threat demonstrates the kind of widespread collaboration that will be necessary on a global level.
As Deanne Stewart, CEO of Aware Super, said of Climate League 2030: “To really shift the dial and achieve lasting action to halt the potentially devastating impacts of climate change, it is critical businesses, investors and governments set transparent, meaningful goals. We can do this individually, but collaboratively we have the power to do much more."
One way Aware Super is seeking to make a difference is to heavily scrutinise fund managers to pick out genuine adherents to environment, social and governance criteria.