HESTA has reported a new target to cut normalised emissions across its portfolio by 2030 and informed AGL, Origin, Santos, and Woodside they are on a watchlist under the Fund’s engagement escalation framework and must demonstrate how their climate strategies are in line with the goals of the Paris Agreement.
In a statement, HESTA claimed to be the first major superannuation fund to declare a goal of achieving net zero carbon emissions across its portfolio by 2050. The Fund, according to the company, has increased a 2020 interim goal to achieve a 33 per cent reduction in normalised emissions by 2030 to 50 per cent. The company added that its enhanced target is being incorporated into the Fund’s Investment Governance Framework.
Strengthening the interim target, according to HESTA CEO Debby Blakey, recognised changes in climate change since 2020, including new scientific research and the Australian Government’s increased commitment.
“HESTA is committed to using active ownership with emissions-intensive companies to help drive down emissions in the portfolio and manage climate risk,” she stated.
In July, HESTA carried out its yearly assessment of the progress made by businesses that are significant contributors to portfolio emissions in the transition to a low-carbon economy as part of putting the framework into practice. The assessment showed AGL, Origin, Santos, and Woodside faced significant decarbonisation challenges that necessitated a substantial change in their business models to provide low-carbon energy products. The engagement escalation framework of the Fund has now been applied to said companies, placing them in a watchlist position.
According to HESTA, AGL, Origin, Santos, and Woodside chairs have received letters from HESTA informing them that their companies have been added to the watchlist and outlining the Fund’s growing concern over the discrepancy between the companies’ strategic goals and a 1.5 °C transition pathway.
In cases where HESTA believes there is insufficient proof of progress in addressing risks and divestment is in members’ best financial interests, the engagement escalation framework also takes into account the use of votes against “Say on Climate” resolutions, Director’s elections, support or filing of shareholder resolutions, and/or consideration of divestment.
“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.
She stated that HESTA has engaged with the companies since at least 2018. While some progress was seen, she said there’s evidence of a gap between the companies’ commitments and their actions to transition their businesses in line with Paris Agreement goals.
Additionally, it was requested that Origin, Santos, and Woodside describe their plans for proving that their Final Investment Decisions (FID) on significant projects align with a carbon budget that follows a 1.5°C pathway.
HESTA expressed its concerns in writing to the companies after voting against the climate plans of Santos and Woodside, which were defeated by 37 per cent and 49 per cent of shareholders, respectively, in May of this year.
As part of its escalation with AGL, HESTA assumed the role of lead engager through Climate Action 100+ in July of this year. Climate Action 100+ is a global investor initiative that encourages the world’s largest corporate glasshouse gas emitters to take the necessary climate change action.
HESTA requested that AGL’s climate strategy be in line with the Paris Agreement and call for the closure of coal-fired power plants by 2035 in its most recent communication with the company. HESTA has also attempted to comprehend how the 1.5 °C pathway-aligned strategy will be supported by the AGL Board refreshment and CEO appointment.
HESTA pledged to invest 10 per cent of its portfolio in climate solutions by 2030 as part of the announcement of a new interim emission reduction target. Examples of these solutions include renewable energy and sustainable real estate.
