Australia’s second-largest pension fund to divest from thermal coal

Bayswater Power Station, Australia. Credit: Wikipedia

Australia’s second-largest pension fund aims to almost halve carbon emissions across its investments within a decade as it joins global peers in mitigating the risks of climate change.

First State Super said it will advocate for Australia’s economy to reduce its greenhouse gas emissions by 45% by 2030 and replicate the target in its portfolio. The A$120 billion ($83 billion) fund will reduce emissions in its stock holdings by 30% by 2023, divest from thermal coal producers from October and continue to review its energy portfolio to avoid owning so-called stranded assets.

“Divestment from thermal coal mining is an important first step, but we recognize there is more to do,” Chief Executive Officer Deanne Stewart said in a statement. “It is essential that as a responsible owner, super funds set strong, ambitious and transparent targets to deliver the kind of action we need now to prepare for a more prosperous and sustainable future.”

The action plan comes after months of pressure on Australia’s pension funds — custodians of the world’s fourth-largest pot of retirement savings at A$2.7 trillion — to follow firms like BlackRock Inc. and Europe’s Stichting Pensioenfonds ABP in cutting exposure to high-emitting companies. Those calls gained traction after the nation’s deadly wildfires heightened concerns about the impact of climate change.

Here’s how First State is preparing for a low-carbon economy:

  • Reduce emissions in its listed equity portfolio by 30% by 2023
  • Divest from companies that get more than 10% of revenue from thermal coal mining from October
  • Reduce carbon emissions in its whole portfolio by 45% by 2030
  • Incorporate a “shadow” carbon price on all its applicable assets and investments
  • Review the fund’s energy portfolio mix and consider divesting or excluding areas that won’t be able to transition to a low-carbon economy
  • Continue to engage with individual companies around their emission reduction targets and plans

(By Matthew Burgess)

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