HESTA puts big Aussie emitters on notice over climate misalignment concerns

Australian super-fund HESTA has added AGL, Origin, Santos and Woodside to its watchlist over concerns that the Aussie energy giants’ climate plans are at odds with a 1.5C pathway. 

The A$68 billion (€46 billion; $46 billion) fund made the announcement today along with a strengthened climate target to halve its “Scope 1 and 2 emissions per million dollars invested” by 2030. Previously, HESTA had set an interim goal of a 33 percent reduction by the same data against a 2020 baseline.  

The fund also committed to invest 10 percent of its portfolio in climate solutions – such as renewable energy and sustainable property – by 2030. 

HESTA has recently come under pressure over its own climate actions. Last month, lawyers representing two fund members suggested that it could be in breach of its obligations and may have misled members over its climate efforts by continuing to invest in oil and gas giants. 

“HESTA is committed to using active ownership with emissions-intensive companies to help drive down emissions in the portfolio and manage climate risk,” CEO Debby Blakey said in a statement published today on the fund’s website.  

Last year, HESTA introduced a new engagement escalation framework and in July assessed the transition efforts of big emitting firms. AGL, Origin, Santos and Woodside were all flagged as facing “significant decarbonisation challenges”. 

Under the framework, watchlisted companies are subjected to “closer engagement and monitoring”. Escalation actions potentially include votes against directors, opposition to company climate plans, support or filing of shareholder resolutions, “and/or consideration of divestment, where HESTA considers there is inadequate evidence of progress to address risks and it is in members’ best financial interests”. 

All four firms are targets of Climate Action 100+, the global investor engagement initiative targeting the world’s biggest emitters. HESTA is a member of CA100+ and as of July leads engagement with AGL.  

Oil and gas duo Woodside and Santos suffered major shareholder rebellions against their climate plans in May. Just under half (49 percent) of Woodside investors voted against its Say on Climate vote, and 37 percent voted against the plan put forward by Santos. HESTA opposed both plans.  

In October, more than 40 percent of shareholders in Origin supported a proposal calling on the firm to align its capital expenditure with the Paris Agreement. A month earlier, more than half of investors in AGL supported a similar proposal calling for Paris-aligned climate targets, including around capital expenditure. 

HESTA also revealed that it has written to the chairs of the four energy companies informing them of its decision and outlining its concerns. The quartet have been asked to respond and outline how their climate strategies align with a 1.5C pathway and “how future capital expenditure will support a timely, equitable and orderly transition to a low-carbon economy”. 

“Each of these companies has a role in mitigating climate risk and reducing emissions in Australia, which will help reduce the systemic climate risk to our members’ portfolio,” Blakey said

Harriet Kater, climate lead (Australia) at non-profit Australasian Centre for Corporate Responsibility (ACCR) described the announcement from HESTA as “an extremely welcome development”.

“Forceful engagement is the most immediate option available to constrain the current and planned climate damage inflicted by listed fossil fuel companies,” she said.

Last month, the ACCR slammed divestment from oil and gas stocks as a “cop out” after the NGS Super fund announced that it had sold out from Woodside and Santos.

“While divestment from fossil fuels stocks may be attractive to funds from a financial or marketing perspective, there is little, if any, evidence that it has an impact on real world carbon emissions,” said ACCR executive director Brynn O’Brien. “On the other hand, there is evidence that sustained and escalating shareholder pressure can have an impact on company decision-making.