The fund reported it would be excluding around 100 of the highest carbon emitters both locally and globally, with the new benchmarks aligning with its commitment to reduce emissions in its listed equities portfolio by at least 30 per cent during the next three years.
The new standards were rolled out to Aware Super’s investment managers in October. The fund reported the carbon emissions of its Australian and global equities exposures were already 40 per cent below that of the baseline of 31 December 2019, ahead of its goal.
Aware Super chief investment officer Damian Graham said the benchmarks were a first for an Australian super fund and formed part of the fund’s climate change portfolio transition plan which was launched in July.
“Committing to net zero emissions by 2050 is an important step for all investors, but it means little without tangible targets and action to help us achieve this goal,” Mr Graham said.
“We know that globally the top 60 emitters are responsible for more than 50 per cent of the greenhouse gas emissions of share market-listed companies. Removing some of these companies from our benchmarks enables us to lower the carbon footprint of our portfolio, with only a modest change to our investment mix.”
He added the benchmarks will safeguard members’ funds from climate risk.
“While many factors can contribute to the performance of companies and sectors, it is notable that the highest Australian listed carbon emitters excluded from Aware Super’s carbon constrained benchmarks returned 7 per cent per annum over the past 20 years compared to an 8.5 per cent return for the ASX overall,” Mr Graham said.
“We know that climate change poses one of the most significant financial risks to our portfolio and members’ financial security in the long-term. We must act now to mitigate these risks and ensure we can continue to deliver for our members both now and tomorrow.”
But companies excluded under the new benchmarks could be allowed back in if they adapt to a low-carbon economy.
“Exclusion from the benchmarks is by no means permanent,” Mr Graham said.
“They are dynamic benchmarks, which means we will assess the carbon intensity of each listed company regularly to ensure that we continue to deliver for our members in terms of returns, while supporting our goal to reach net zero emissions by 2050.”
