Australian superannuation funds are “quietly” and “slowly” reducing their equities exposure to domestic fossil fuel firms, according to analysis by Market Forces, which found that 10 of the largest pension funds in the country have withdrawn A$2.5bn (€1.5bn) from the sector since 2018.
The campaign group looked at super fund exposure to 23 Australian public companies it regards as most “out of line” with the Paris Agreement, including miners BHP and Whitehaven Coal, energy firm Origin, and oil & gas giants Woodside and Santos.
REST, Australia’s pension fund for the retail sector, was found to have cut its exposure the most, with a 27% (A$607m) reduction since 2018. In a legal settlement last year with a beneficiary who claimed REST was not taking climate change seriously enough, the fund agreed to introduce a raft of measures to align its portfolio with Net Zero by 2050.
Reacting to the Market Forces report, a spokesperson for REST told RI that it has set “six key measures” to achieve its decarbonisation goal, “including a rapid reduction in the fund’s exposure to thermal coal mining, targets to reduce the carbon intensity of our share portfolio and property assets, and increased investment in renewable energy and low-carbon solutions”.
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She added that between June 2019 and June 2021 REST reduced the Weighted Average Carbon Intensity of its total shares portfolio by 23%.
A$125bn Aware Super also confirmed that its waning exposure to fossil fuels – with reductions estimated to be around 18% (A$412m) since 2018 – is a “direct response” to its 2020 Climate Change Portfolio Transition Plan.
According to the report, the Health Employees Superannuation Trust Australia (HESTA) was the only fund not to have reduced its exposure to the 23 companies identified, increasing it instead by around 14% (A$178m). HESTA had not responded to a request for comment at the time of publication.
Last week, UniSuper, which manages A$100bn of pension savings on behalf of academics in Australia, revealed that it had halved its fossil fuel holdings since last year. In its fourth annual climate risk report, the fund – which was not included in the Market Forces assessment – said that its overall fossil fuel exposure is currently 2.5%, down from 5% in 2020.
The trend appears to have spread to Australia’s neighbour, too. This week it was reported that KiwiSavers, the New Zealand Government’s opt-in retirement provision, had dumped NZ$331m (€195m) in fossil fuel holdings from its funds. As of April, KiwiSavers now invests 1.8% (NZ$1.5bn) of its assets in oil & gas companies, down from 2.45% six months earlier.
Will van de Pol, a campaigner at the Market Forces, claimed that some of the funds now “quietly” exiting the sector have previously justified their investments through shareholder engagement.
“Despite claiming engagement is the best approach to managing climate risk, super funds are clearly giving up on some of the most belligerent fossil fuel companies and quietly cutting their investments,” he said.
The research comes the same week Australian oil giant Santos was revealed to be facing a landmark legal challenge from the Australian Center for Corporate Responsibility (ACCR), a sustainability-focused nonprofit. The case, which has been lodged with the country’s federal court, centres on allegations that Santos had provided misleading information to its shareholders on its climate plans. It challenges the “veracity” of the company’s 2040 Net Zero plan, particularly its dependence on carbon capture and storage technologies.
ACCR is being represented by the Environmental Defenders Office, which will argue that Santos has engaged in potentially “misleading or deceptive conduct” with regard to its clean energy claims – claims which may constitute a contravention of “corporate and consumer law”, according to the ACCR and its legal team.
A spokesperson for Santos declined to comment on the lawsuit.
Staying in Australia, a new study has found that climate risks are already playing a key role in determining the value of government bonds. The work, which is a collaboration between the University of Technology Sydney and Sydney-based fixed income specialists Fortlake Asset Management and Ardea Investment Management, reported that countries with reduced carbon emissions incur lower risk premiums on sovereign debt.