Super giant HESTA divests coal, commits to 'net zero' investments by 2050

The $52 billion super fund for healthcare workers has divested holdings in thermal coal companies under a new climate policy that commits to 'net zero' emissions across the entire portfolio by 2050.

HESTA's updated climate plan involves reducing absolute carbon emissions across its investment portfolio by 33 per cent within the decade and 100 per cent by 2050, in an effort to bring its investment strategy in line with the goals of the Paris Climate Agreement.

The role of large super fund investors to limit emissions has increasingly come to the fore after the Intergovernmental Panel of Climate Change report found there would be "long-lasting or irreversible" impacts to the environment if warming exceeded 1.5 degrees.

"Climate change is probably the single most important issue that we'll be facing over the next century and really, for us, it's so important because it's a material financial risk for our portfolio," HESTA chief executive Debby Blakey said. "We are the generation that needs to address this and we really do need an urgent response."

HESTA chief executive Debby Blakey.Credit: Wayne Taylor

The emissions reduction targets will apply to the fund's entire portfolio – including passively held stocks and unlisted asset classes – and the plan also includes increasing investments in low-carbon assets, like renewable energy or green infrastructure.

HESTA announced in 2014 it would make no new investments in thermal coal companies that make more than 15 per cent of revenue from exploration, production or transportation of thermal coal, the resource used for electricity generation.

The Age and Sydney Morning Herald revealed in February this policy allowed the fund to retain a stake in companies like Coal India, that boasts of being the "single largest coal producer in the world" operating 83 mines and producing 83 per cent of India's overall coal output.

The reports prompted a group of more than 400 doctors and health professionals, including former Australian of the year Fiona Stanley, to back a campaign demanding HESTA divest from all fossil fuel stocks.

HESTA's new climate policy applies this exclusion to all thermal coal companies, including retrospective investments, and a spokesman confirmed the fund had divested from Coal India as well as its holding in Whitehaven Coal, a company running four coal mines in NSW and Queensland.

"We have a view that thermal coal is in structural decline and we are concerned about stranded assets,” Ms Blakey said. “This idea that coal can continue to provide base load energy in the long-term is really inconsistent with what's needed to meet the goals of the Paris Agreement.”

However, Ms Blakey stopped short of committing to divesting from the fossil fuel industry altogether, saying there was a long time between now and 2050 and the fund would continue its policy of engagement with these companies to encourage the adoption of more sustainable practices.

"If we are an investor, we have a responsibility to have a seat at the table and really influence the transition to the low-carbon economy," she said.

Kate Lardner, a doctor at the Frankston Hospital and organiser of the protest group Healthy Futures, welcomed the emissions reductions targets but said HESTA's exclusions policy did not go far enough.

“They can't still be net zero emissions if they're investing in oil and gas,” Ms Lardner said. "HESTA has not explained how the engagement process has achieved any outcomes." "They've kept up this mantra of saying we want to remain invested to influence change but it's very vague, non-specific dialogue.”

Ms Blakey said the fund was looking to improve communication with members about the outcomes of engagement with the oil and gas companies. “We want to be very responsible in terms of reporting clearly, that's something we are working on.”

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