Major Aussie super fund to halt new investments in major thermal coal companies to avoid stranded assets

HESTA, the AUS$29bn (€20.3bn) superannuation fund for the health and community service in Australia, has announced that it will stop new investment into major thermal coal-related companies, the first major Australian fund to do so and one of a small but growing number of pension funds making investment decisions based on potentially ‘stranded’ high carbon assets. Anne-Marie Corboy, HESTA’s chief executive officer, said it was part of the fund’s ongoing response to the increasing impact of climate change on its long-term investments: “This ‘unburnable carbon’ is likely to become an increasing risk in the medium to long term, especially for companies heavily invested in thermal coal, or those seeking to develop new long-term assets. HESTA is of the view that, new or expanded thermal coal assets face the highest risks of becoming stranded before the end of their useful life. It is not prudent, nor in the long-term interest of members, to invest in the expansion of these assets.” She added that investors had an important role to play in the transition to a lower-carbon intensive future triggered by a push to limit the impact of global warming.Under the new restriction, HESTA will not make any new investments in unlisted or newly listed companies that derive more than 15% of revenue or net asset value from exploration, new or expanded production, or transportation of thermal coal, which is mainly used in power generation. HESTA will also not fund the business expansion of any of the above activities in already listed companies. “Companies heavily invested in thermal coal face the highest ‘unburnable carbon’ risk, based on the size of existing proven coal reserves, the higher carbon intensity compared with other fossil fuels, and the increasing viability of substitutes for power generation, including renewable sources,” said Corboy. Alongside the new restriction on the whole portfolio, a more extensive exclusion applies to Eco Pool, HESTA’s socially responsible investment option. Eco Pool will exclude investments in any listed company that derives more than 15% of revenue or net asset value from: the generation of electricity from brown coal or lignite, the exploration, production or transportation of thermal coal, or from contracting or supplying to listed companies captured by this exclusion. Eco Pool already excludes companies with uranium mining operations and those that manufacture tobacco products.