UniSuper pushes back against climate activists over its holdings in fossil fuel companies

UniSuper is standing firm on its remaining fossil fuel exposures, saying it will not be pressured to fully divest, even as it admits it now has little clout with oil and gas majors.

UniSuper’s fossil fuel exposure represents just 2.8 per cent of its $110bn portfolio. Picture: Getty Images

UniSuper is standing firm on its remaining fossil fuel exposures, saying it will not be pressured by climate activists to fully divest even as it admits its holdings in oil and gas majors such as Santos and Woodside, at just a fraction of the fund’s overall assets, are too low to engage on climate issues.

Speaking ahead of the launch of UniSuper’s climate risk report on Wednesday, chief investment officer John Pearce said divesting Santos “would not solve any problems” as he pointed to the need for fossil fuels in the energy transition, but admitted the fund could no longer pressure the oil and gas major to stay in line with its net zero ambitions.

“At 0.15 per cent of the fund … we don’t have enough stock to engage with Santos. They don’t talk to us because we’re not a big enough shareholder. This is the flipside of not having a material ownership in a company,” Mr Pearce said.

“Divesting Santos now would not solve any problem for anyone … there are no shortage of buyers for Santos; whether it’s Santos or Woodside, all we would be doing is transferring the stock to someone else who would be very happy to take it off our hands.”

Mr Pearce’s comments come weeks after the $110bn UniSuper, the industry super fund for the university sector, was hit with a legal threat over its investment in Santos.

The Environmental Defenders Office in August wrote to the fund on behalf of a UniSuper member warning that its $168.3m investment in the oil and gas company “may amount to a breach of law”. The EDO said UniSuper may have breached its trustee obligations by failing to adequately examine the net zero and emissions reductions claims made by companies in which member funds were invested, including Santos.

The super fund’s exposure to fossil fuels, including in passive index funds, currently sits at just 2.8 per cent of the overall portfolio, according to its 2022 climate risk report, up slightly on the 2.55 per cent it reported in 2021.

UniSuper chief financial officer John Pearce. Picture: Supplied

The uptick was as a result of surging energy markets driving up share prices and came even as the fund took some profits in the year, UniSuper said in the report.

Admitting that for a cohort of members “anything above zero is too much”, Mr Pearce said many of the fund’s members understood the need for energy security and that “you can’t kill off fossil fuels straight away”.

Alongside the 0.15 per cent in Santos, UniSuper’s positions in Woodside and Ampol sit at just 0.07 per cent of the fund’s overall assets. At such low levels, UniSuper had no clout on pushing these companies to meet their climate targets, Mr Pearce said. “Hence we focus our engagement efforts where we can maximise influence,” he said.

But the fund would not give in to activist threats by fully divesting fossil fuels, he said. “We don’t want to start sending signals to the market that we’re going to divest just in response to activism,” Mr Pearce said.

Due to the size of the positions, these heavy emitters do not appear in the fund’s “traffic light report”, which grades its 50 largest investments based on their commitment to net zero.

All up, 44 of the 50 had set Paris-aligned targets, getting a green light from UniSuper, the climate report said. This was up from 40 the year prior.

Just one of its holdings, ResMed, got a red light for not having a firm commitment on net zero, while Aristocrat, CSL, Cleanaway, Qube and James Hardie all got amber lights for not having adequate commitments.

Meanwhile, 33 of the 50 had adequate action plans to get to net zero, while ResMed was again pinged with a red light for not having an interim target.