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Institutional investors warn against backflipping on climate commitments

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By Rhea Nath
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3 minute read

Moving the goalposts on Australia’s 2030 climate target, as recently indicated by the Coalition, will “corrode” investor confidence, according to a leading network of institutional investors.

The Investor Group on Climate Change (IGCC), managing $35 trillion in global assets and $5 trillion in local assets, has warned there could be significant implications from governments changing course with regards to Australia’s climate target and Paris Agreement commitments.

Last week, Opposition Leader Peter Dutton indicated the Coalition will not offer a 2030 climate target ahead of the next federal election, effectively scrapping the legislated 2030 target of a 43 per cent cut compared with 2005 levels.

He said the Coalition remained committed to net zero targets by 2050, though he stopped short of revealing its interim targets.

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According to the IGCC, backflipping on these commitments will only “corrode” investor confidence, which has only recently started to recover “from decades of climate policy chaos”.

The IGCC counts super funds like Hostplus, Aware Super, Australian Retirement Trust, HESTA, UniSuper, and Rest among its 104 members across Australia and New Zealand alongside asset owners like Vanguard, BlackRock, Mercer, Perpetual, AMP, and T. Rowe Price.

“Investors have a legal obligation to protect the retirement savings of millions of Australians.

“They can only do this with a fast, fair, and well-planned transition to net zero, which will provide a better life for all: cleaner, greener, and healthier communities, and more money to live comfortably,” said the IGCC’s managing director for policy, Erwin Jackson.

“Backflipping on these commitments and withdrawing from the Paris Agreement would corrode investor confidence at a time when Australia is competing for funding for new technologies and clean industries, local jobs, and training opportunities.”

In its statement, the group urged parliamentarians to “stay the course and set emissions targets with the highest level of ambition”.

It added that through governments supporting ambitious clean investors, Australia will be able to harness the economy’s full potential.

Already, a number of super funds have unveiled their own “ambitious” roadmaps to meeting 2030 targets. Cbus holds a target of at least 40 per cent less embodied carbon by 2030 while HESTA announced in June last year that it achieved its initial climate target of a 33 per cent reduction in normalised portfolio emissions by 2030 against a 2020 baseline, eight years ahead of schedule.

Last month, the IGCC’s latest report on the state of institutional investors’ net zero investment noted Australian investors have faced “significant headwinds” on climate from global and local influences.

Surveying 22 asset owners and 41 asset managers, it said the headwinds ranged from “an aggressive ‘anti-ESG’ agenda from sections of the US political establishment, through to increasing regulatory requirements that challenge local investors’ disclosure around climate ambition”.