Australian super funds are quietly divesting from fossil fuels – but activists say they should convince companies to do better instead

(Ashley Cooper, Construction Photography, Avalon, Getty Images)
  • Some of Australia’s largest super funds, including HESTA and Aware Super, are divesting from fossil fuels and committing to 2050 net-zero targets.
  • However, corporate activists say the move tackles growing concerns with investment risk, rather than climate action itself.
  • “Investors are quietly abandoning companies that are proving ‘too hard’ to change, and failing to exhaust the tools available to change them,” Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility (ACCR) said.
  • Visit Business Insider Australia’s homepage for more stories.

Controlling around $3 trillion of retirement savings, super funds are beginning to bail out of fossil fuels, but corporate activists say they need to do more than simply walk away from the industry.

In 2020, a slew of the country’s biggest funds upped the ante on emissions targets, committing to a net zero carbon target by 2050, including giants HESTA, Cbus, Aware Super (formerly First State Super) and IFM Investors.

The pledge by those four industrial investors alone amounts to a staggered $370 billion commitment to zero emissions.

But the Australasian Centre for Corporate Responsibility (ACCR) says funds have to do more than simply pull their money out of fossil fuels.

“While they may be doing what is necessary to protect members’ interests, any suggestion that these actions will reduce real world emissions is unsupported by evidence,” director of climate and environment Dan Gocher said.

“Investors are quietly abandoning companies that are proving ‘too hard’ to change, and failing to exhaust the tools available to change them.”

In a new report, titled Cutting Carbon, Gocher argues that super funds have postponed progress on divestmen based on a claim they needed to be shareholders in order to pressure companies to do better.

However, the quiet divestment pledges now appears to be a white flag that these companies either aren’t ready to change, or aren’t getting the message in the first place.

“Investors have not demonstrated if and how they have applied pressure to emissions intensive companies prior to divestment,” Gocher said.

“Not a single director has been removed on climate grounds, nor has a remuneration report been opposed. Instead this divestment happens in stealth and often without any public acknowledgement.”

Investors must manage transition

The predicament demonstrates the vexed nature of corporate-guided climate action and the unwillingness of some investors to lobby.

While divestment might help provide the stick fossil fuel industries may need, it may not be the silver bullet activists want. For one, operations that aren’t going to disappear overnight need to be managed through a transition period.

“Some investors have demanded that companies like BHP divest their coal assets, despite there being no evidence that this will result in real world emissions reductions. These assets may end up in the hands of a buyer of last resort, that has no intention of operating them responsibly with climate goals in mind, much less in supporting workers through the transition, or rehabilitating mine sites,” Gocher said.

With management remaining under the purview of companies, effective lobbying remains paramount.

“Very few Australian listed companies have set Paris-aligned emissions reduction targets. It is clear that years of polite conversations behind closed doors have failed to produce the results many investors have long promised,” Gocher said.

“While some of these companies may well be incapable of change, and worthy of divestment, investors must be prepared to escalate their engagements.”

Australian companies produce mixed report card

An ACCR analysis of some of Australia’s largest companies shows the mixed results of the current strategy. It shows plenty of Australian mining companies for example have increased their operational emissions over the last three years.

Fortescue Metals Group (FMG), operated by billionaire chair and born-again environmentalist Andrew ‘Twiggy’ Forrest, increased emissions by more than 25% to produce the equivalent of nearly 245 million tonnes of CO2 annually. No doubt, part of that increase has been the product of ramping up record production to capitalise on a soaring iron price.

Infrastructure and mining group CIMIC increased their own emissions footprint by 18%, aluminium-producer Alumina by 10%, and Whitehaven Coal by nearly a full fifth.

However, on the flip side, mining BHP has managed to cut their emissions by more than 7% and Woodside Petroleum by more than 10%. Even Rio Tinto, busy blowing up the Juukan Caves this year and one of the country’s largest emitters, managed to cut theirs by 13%.

Meanwhile Australian supermarket giants Woolworths and Coles, pushed along by their own green energy goals, have slashed their emissions by 16% and 7% respectively.

Alan Joyce’s ‘airline that can’t fly’ Qantas meanwhile had no choice but to cut its emissions by 25% as flight capacity sinks.