12 February 2024
Climate change will impact economies, industries, societies and the environment. It presents both risks and opportunities for the companies and assets we invest in on members behalf.
When we talk about climate change, we are referring to long-term shifts in temperatures and weather patterns. These are mainly driven by human activities such as through the burning of fossil fuels (like coal, oil and gas), agriculture and land-clearing, which produces carbon emissions.
Climate change is driving a low carbon transition in the world economy. Governments, investors, and companies around the world are working to reduce their carbon emissions in an effort to reduce the worst impacts of climate change.
As an AustralianSuper member, your super is invested in Australian and international markets with investments that touch many areas of the global economy. The companies and assets we invest in can be exposed to the risks of climate change in different ways. For example, companies in the energy sector will need to adapt to changes in energy demand, as renewable energy sources become a larger proportion of the world energy mix and other climate change solutions are developed. As global temperatures rise, more extreme weather conditions and events like floods pose physical risks to some of our unlisted assets, for example some infrastructure assets.
Our net zero commitment
AustralianSuper is committed to helping members achieve their best financial position in retirement. We believe a smooth and orderly net zero transition over time will deliver the best investment outcomes for members. We’ve made a commitment to achieve net zero carbon emissions by 2050 in the investment portfolio (based on scope 1 and scope 2 emissions of portfolio investments). Our ability to achieve the net zero commitment is dependent on policymakers and portfolio companies making and delivering on their own net zero commitments.
There are lots of things said about the climate transition and it is often difficult to understand what it all means. We’ve provided the below explanations to help members understand our climate change commitments.
Net zero carbon emissions means that the total carbon emissions produced are equal to the total amount removed or mitigated, resulting in no additional emissions being added to the atmosphere.
Scope 1 emissions are direct emissions produced by a company’s own activities or operations.
Scope 2 emissions are indirect emissions associated with the energy a company purchases and uses which are generated from another company.
Research by the global central banks1 indicates that a net zero 2050 scenario results in the lowest economic cost outcome in the long-term. This is consistent with our purpose of helping members achieve their best financial position in retirement.
read more about our net zero commitment
Managing climate change risk
Climate change presents financial risks and regulatory challenges, but also potential opportunities for our investments.
AustralianSuper’s approach to managing climate change risks and opportunities and the net zero transition in the portfolio is conducted across four core pillars: Integration, Stewardship, Advocacy and Measurement & Disclosure. The application of our approach to managing climate change risks and opportunities varies by asset class, and the characteristics of our investment, including whether we’re investing directly or through external managers, or whether our investment is actively or passively held.
Engaging with companies we own
AustralianSuper exercises its rights and responsibilities as an asset owner to seek positive management of Environmental, Social and Governance issues that we believe can impact members’ returns, including climate change. We do this by engaging with the companies we invest in (individually or with other investors) and voting on company and shareholder resolutions. Where we invest in Australian shares directly, in the internally managed fundamental portfolios (which represented 23% of the total portfolio as at 30 June 2022), our engagement is focused on the larger emitters in the portfolios, identified through our internal carbon tracking analysis.
Our internal carbon tracking analysis helps us to monitor our progress towards our net zero commitment. We also use external carbon footprinting to measure and report our historical emissions.
Investing in energy solutions
We believe members can benefit from quality investments exposed to the energy transition. The transition in the energy mix will create investment opportunities across a range of technologies, including renewable energy and climate change solutions. As industry and households adjust to a low carbon economy we will see opportunities through energy efficiency measures, changes in transport, industrial processes, and product use.
We invest in energy solutions, including renewable energy, energy efficiency and supporting infrastructure, in the Australian shares, international shares, and unlisted infrastructure asset classes. We have invested over $2.5 billion in energy solutions, including $1.4 billion in renewable energy as at 30 June 2022.
Looking forward
We are continuing to evolve our approach to managing climate change risks and the Net Zero 2050 transition in the investment portfolio.
You can read more about our approach to climate change in our Climate Change Report.
References
1. Network for Greening Financial System: NGFS Scenarios for central banks and supervisors, September 2022. Scenarios show the transition and physical risk impacts on GDP deviation at 2050 and 2100. ngfs.net/en/ngfs-climate-scenarios-central-banks-and-supervisors-september-2022
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