Rather than settling for the relatively “low base” of being fossil fuel-free, Australian Ethical is aiming to completely remove all exposure to carbon from its portfolio by 2050.
Australian Ethical managing director Phil Vernon told InvestorDaily the 2015 Paris Climate Conference amplified the urgency around climate change globally.
“The conference delegates officially acknowledged that there is a massive gap between where we should be and what the countries are pledging,” Mr Vernon said.
“In order to address it a massive amount of capital needs to shift in a very short amount of time. So the urgency is just huge.”
As a result, Mr Vernon said, any carbon omission into the atmosphere is an “omission too much”, and Australian Ethical is “out of coal and fossil fuel completely”.
“We’re also overweight in renewables. And we believe that in the long term, that’s going to be good from an investment point of view because that situation is only going to go one way,” he said.
“Government policy around the world is just going to tighten and tighten. So that’s why we say that it is a structural change [to investment markets],” Mr Vernon said.
Australian Ethical has decided to move beyond being fossil fuel-free, having set a target to completely 'decarbonise' its portfolio by 2050, he said.
“The ultimate aim is to decarbonise the entire economy. And we believe that investment markets should be doing that as well... companies, investment markets and super funds.”
Mr Vernon divides the investment community into three types of fund managers.
“There’s people like us who are fully committed and I talk about as being the future managers. We’re managing for the way that the world should be in the future,” he said.
“There’s the ones in the middle that I call the risk managers – they understand that climate is a risk and it’s coming. They’re structuring their portfolios in order to position themselves for that risk, but they’re doing it reactively or responsively.
“And then there’s the third lot that don’t recognise it at all. And they’re just managing to maximise returns. They’re not recognising climate change at all.”