HESTA has created a watchlist of companies that it deems unconducive to its new goal to halve normalised emissions across its portfolio by 2030.
On Tuesday, HESTA announced it has lifted to 50 per cent an interim target it set in 2020 to achieve a 33 per cent reduction in normalised emissions by 2030.
In doing so, the fund has announced heightened monitoring and engagement with key emissions-intensive companies, including AGL, Origin, Santos and Woodside, having identified that all four face “significant” decarbonisation challenges and require a “major shift” in their strategies to offer low-carbon energy products.
The fund revealed that it has written to the chairs of all four companies informing them of its decision to place them on watchlist and outlining its heightened concern over the disparity between their strategic targets and a 1.5-degree Celsius transition pathway.
Under its engagement escalation framework, HESTA confirmed it has several tools at its disposal, including divestment where it considers there is “inadequate evidence” of progress to address risks and it is in the best financial interests of members.
“The science is telling us this is a critical decade and that mitigating climate change-related risks requires an accelerated transition and a more rapid reduction in emissions,” HESTA CEO Debby Blakey said.
“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,” Ms Blakey noted.
She revealed that HESTA has engaged with these companies since at least 2018, and while some progress has been reported, “there’s evidence of a gap between the companies’ commitments and their actions to transition their businesses in line with Paris Agreement goals”.
A response has been sought from each of the companies on how their climate strategies align with a 1.5-degree Celsius pathway as well as how future capital expenditure will support a timely, equitable and orderly transition to a low-carbon economy.
Additionally, Origin, Santos and Woodside have been asked to outline how they will demonstrate that new major projects are consistent with a carbon budget aligned with a 1.5-degree Celsius pathway.
In May this year, HESTA 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.
In its latest communication with AGL, HESTA, which came out against the company’s now withdrawn demerger plan, 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.
The super fund is also seeking to understand how the company’s recent board refresh and CEO appointment will support a 1.5-degree Celsius pathway-aligned strategy.
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.