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Super funds step up engagement tactics

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4 minute read

Super funds are exerting increasing pressure on companies to up their climate ambition.

The country’s super funds are exerting increasing pressure through responsible corporate engagement, with HESTA just this week announcing it has removed Origin Energy from its climate watchlist after the latter made some applaudable moves to dull its negative climate impact. 

Last month, the super fund put Origin, AGL, Santos and Woodside on notice under its engagement escalation framework and outlined its heightened concern with the apparent disparity between the companies’ strategic targets and the 1.5˚C transition pathway.

But having recognised a shift in Origin’s strategy, after the energy provider said it intends to divest its 100 per cent interest in oil and gas assets in the Beetaloo Basin, HESTA commended Origin and removed it from its watchlist. 

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Commenting on HESTA’s change advocacy through corporate engagement, RIAA CEO Simon O’Connor told InvestorDaily that corporate engagement has become an increasingly popular strategy used by Australian investment managers, including its biggest super funds.

“Large investors — particularly our largest asset owners — understand that it’s not practical nor effective to simply divest from and shuffle assets in a portfolio,” Mr O’Connor said. 

“Active ownership and engagement practices are about working to shift company strategies towards more positive outcomes. Those investors doing corporate engagement well should be documenting and disclosing this activity and showing where it’s delivering results.”

RIAA found that corporate engagement was the second most popular responsible investment approach in 2021, with a 54 per cent rise in the value of assets used to agitate for change on ESG issues, the largest increase of all the responsible investment strategies.

HESTA has been engaging this strategy for some time, having earlier created a watchlist of companies that it deems unconducive to its new goal to halve normalised emissions across its portfolio by 2030.

Late last month, the fund also penned a letter to ASX 300 companies ahead of the upcoming AGM season calling for an ambitious response on long-term systemic risks such as climate change, social inequality, and biodiversity.

Regarding its most recent engagement with Origin, HESTA said this week: “We believe Origin has articulated a climate strategy consistent with a 1.5˚C pathway and that their change in strategic direction will better support their ambitions to lead the energy transition through cleaner energy and customer solutions.”

In light of this view, HESTA said that it intends to vote in favour of Origin’s Climate Transition Action Plan (CTAP) at the upcoming Say on Climate advisory vote. However, the super fund added that it believes there are still areas of Origin’s CTAP that require further development.

“It’s our view that Origin could play a more active role in supporting a just transition for affected communities,” HESTA noted.

“We also ask Origin to consider how it can leverage its membership of industry associations to advocate for greater alignment with their climate strategy and commitment with a 1.5°C pathway.”

In May this year, HESTA famously voted against the climate plans of both Santos and Woodside, which were rejected by 37 per cent and 49 per cent of shareholders respectively, and wrote to the companies outlining their concerns.

It also came out against AGL’s now withdrawn demerger plan, and said it wants to see the company’s climate strategy align with the Paris agreement, which will require the closure of coal-fired power stations by 2035. 

Super funds step up engagement tactics

Super funds are exerting increasing pressure on companies to up their climate ambition.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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