Australian Fund HESTA Plans to Halve Portfolio Emissions by 2030

By Nick Hedley

Australian superannuation fund HESTA, which has AU$68 billion (US$46 billion) in assets under management, plans to halve emissions from its investment portfolio by the end of the decade.

The fund had previously set a 33% interim emissions reduction target, but said it had raised its ambitions due to the advancement of the climate crisis and the Australian government’s firmer decarbonization targets.

“The science is now 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 in a statement.

As part of its plans to slash emissions, HESTA said it had informed heavy polluters including AGL Energy, Origin, Santos and Woodside that they had been placed on a watchlist and HESTA could divest of their shares if they do not step up their climate ambitions.

In August, NGS Super, a smaller fund with AU$13 billion (US$8.8 billion) under management, said it had divested of oil and gas companies Woodside and Santos as part of its plans to have a carbon-neutral portfolio by 2030. NGS Super’s chief investment officer, Ben Squires, told Markets Group this move was partly aimed at reducing investment risk as the clean energy transition gains momentum.

HESTA said companies on its watchlist were subjected to closer engagement and monitoring. The fund would also consider voting on climate-related shareholder resolutions.

“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,” Blakey said.

“HESTA has engaged with these companies since at least 2018. While we’ve seen some progress, there’s evidence of a gap between the companies’ commitments and their actions to transition their businesses in line with Paris Agreement goals.”

In May, HESTA voted against the climate plans of both Santos and Woodside, which were rejected by 37% and 49% of shareholders, respectively, and wrote to the companies outlining its concerns. 

Meanwhile, HESTA also announced that it would invest 10% of its portfolio in climate solutions, such as renewable energy and sustainable property, by 2030.

HESTA is the largest superannuation fund dedicated to Australia’s health and community services sector. It has 950,000 members – more than 80% of whom are women.

The fund is merging with Mercy Super, which has 13,000 members and AU$1.6 billion (US$1.1 billion) under management.