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The country's largest superannuation fund has dumped its holding in Whitehaven Coal as it ramps up its climate policy to include a net zero by 2050 target.
AustralianSuper, which manages $180 billion in retirement savings, announced on Thursday it would align its investment portfolios with the net zero target by engaging with companies it invests in to help them formalise their transition towards zero carbon operations.
The superannuation giant's new policy did not include plans to exit high polluters, as competing industry funds such as AwareSuper and Hesta have done, but AustralianSuper director Andrew Gray said the fund had already slashed its exposure to thermal coal.
"We have a very integrated approach to managing climate in investments," Mr Gray said. "As a result, currently AustralianSuper does not have any active investment in thermal coal companies."
AustralianSuper ESG director Andrew Gray says its new climate policy is about investment returns.Credit:Josh Robenstone
Mr Gray said the thermal coal industry relies on the development of carbon capture technology, but slow advances in this space, combined with global trends away from thermal coal as an energy source had made these companies a high-risk investment.
AustralianSuper confirmed that over the past six months it had sold out of Whitehaven coal, which operates four mines in the Gunnedah Basin of New South Wales. Mr Gray said the fund would now turn its lens to passive investments in the thermal coal industry, including South32, despite these being relatively minor.
"It's about $160 million in a $180 billion fund, so it's a very small dollar amount and not a significant investment risk," he said. "Having said that, as part of this net zero by 2050 approach, we will examine how we can manage the holdings in the passive portfolio."
'Embracing net zero 2050'
AustralianSuper will use its new target to force companies to formalise plans to transition towards zero carbon operations, which will extend to scope three emissions – those from the supply chain – where possible.
Net zero emissions means every tonne of greenhouse gas emitted must be matched by a tonne removed from the atmosphere through carbon sinks including forest plantations. Major Asian trading partners have recently set net zero targets, but the Australian federal government has refused to do so.
Mr Gray said the financial industry was "moving ahead" of governments on the transition to a low-carbon economy.
"Recent moves in policy by Japan, China, South Korea clearly shows where global policy makers are going," he said. "They are embracing net zero 2050, that’s telling us there is a wholesale low carbon economic transition happening here."
AustralianSuper joins a range of financial institutions including IFM Investors and ANZ Bank, who have recently formalised net zero targets. ANZ chief executive Shayne Elliott told investors in October the decision to stop funding new thermal coal mines was not an ethical or moral decision, but an economic one.
'Good investment practice'
AustralianSuper has been increasing its investments in international shares, mostly due to its size, but Mr Gray said climate concerns also informed the strategy to pivot away from the local sharemarket, which is dominated by high emitting industries.
"The size of our investment in international equities has been growing, and will continue to grow," he said. "The primary driver of that is our size, it's a scale issue, but it's also true to say we integrate consideration of climate change issues."
The financial industry has been criticised by the federal government, particularly Resources Minister Keith Pitt, for engaging in activism in the decision to move away from coal. However, Mr Gray said its net zero target was not part of a public policy campaign, but rather one focused on returns.
"At the end of the day for us, this is about good investment practice."
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