Climate related risks will impact economies, industries, societies and the environment. As such, climate change presents risks and opportunities for companies and assets in our investment portfolio
AustralianSuper has made a commitment to achieve net zero carbon emissions by 2050 in the investment portfolio. This is in line with international scientific consensus on reducing the economic impacts of climate change, which is consistent with our objective of helping members achieve their best financial position in retirement.
Managing the transition to a net zero 2050 portfolio
AustralianSuper supports the goals of the Paris Agreement on climate change, which aim to limit global warming to well below 2 degrees, preferably to 1.5 degrees, by 2100. Our net zero 2050 commitment is consistent with the scientific consensus of reductions required to meet the goals of the Paris Agreement as outlined by the Intergovernmental Panel on Climate Change (IPCC).1
We recognise the consensus that meeting the Paris Agreement goals will result in the lowest economic cost climate change outcome. Governments, investors and companies around the world are working towards a net zero economic transition by 2050. Global policymakers, including Australia, have set net zero targets with 91% of the world’s economy having committed to achieve net zero emissions at or near 2050.2 Our internal carbon tracking analysis shows that investee companies responsible for almost 85% of emissions in our actively managed portfolios in the Australian shares asset class have made net zero commitments.3
Our commitment is based on our assumption that policy makers and portfolio companies will deliver on their commitments to meeting the goals of the Paris Agreement. Given the scale of political, economic and societal change required for policy makers and portfolio companies to meet these commitments, and given the inherent challenges associated with long-term forecasts, there is some uncertainty as to whether these commitments will be met.
How AustralianSuper is working towards a net zero portfolio by 2050
AustralianSuper advocates for the incorporation of the net zero transition into the business strategies of the companies and assets we invest in.
We monitor our progress towards our net zero goal through our internal carbon tracking activities, which measure the current and estimated future emissions of certain investments in our portfolio based on their current commitments and targets.
Our internal analysis currently measures the Scope 1 and Scope 2 emissions of our investments in the Australian shares, international shares, unlisted and listed property, and unlisted and listed infrastructure asset classes, which represent around 70% of the total portfolio.4 This analysis helps us to identify the largest contributors to current and future portfolio emissions and informs our stewardship approach.
As an example, we have identified that for our actively managed portfolios in the Australian shares asset class, five companies are responsible for almost 84% of current emissions.5 We have also estimated the emissions for these portfolios in the Australian shares asset class at 2050 based on identified company targets. We engage (individually or via collaborative networks with other investors) with large emitters in these portfolios on their climate action plans.
Our climate change actions
On members’ behalf, we’re a large investor in Australian and international markets with investments that touch many areas of the global economy. We aim to manage the transition to a net zero 2050 portfolio by the way we invest and our actions as owners described below.
Our ESG and Stewardship program for climate change varies by asset class and doesn’t apply to all asset classes.
Through our ESG and Stewardship program we:
- Integrate climate change considerations into our investment process for certain asset classes and investments. Our approach is more developed in some asset classes, such as Australian and international listed shares, unlisted infrastructure and unlisted property. Our approach also varies by the characteristics of our investment, including whether we’re investing directly or through external managers.
- Engage with the larger contributors to emissions in actively managed portfolios in the Australian shares asset class to understand their:
- Commitments to emissions targets aligned to the Paris Agreement, net zero 2050 business strategies and progress on emissions reductions.
- Governance and management of climate change risks and opportunities.
- Climate change disclosures, such as the Taskforce on Climate-related Financial Disclosure frameworks (TCFD).
- Were a founding member of Climate Action 100+, the world’s largest investor engagement initiative on climate change seeking emissions reductions from the world's largest carbon emitters.
- Vote on climate change related resolutions, supporting those we believe will create or enhance shareholder value and/or will result in improved disclosures on climate change.
Making progress on reducing our carbon footprint
We monitor our progress towards net zero 2050 by measuring the carbon intensity of certain investments in our portfolio. We have been measuring the carbon intensity of the Australian shares and international shares asset classes portfolios using an external carbon consultancy since 2013. The carbon intensity of our portfolios in these asset classes has reduced by 45% between 2013 and 2021. This analysis tracks the greenhouse gas emissions of our portfolios in our Australian shares and international shares asset classes based on the value invested (AUD million). These asset classes represented around 45% of AustralianSuper’s total portfolio value as at 30 September 2021.6
We are working towards measuring the carbon footprint of our investments in other asset classes. Our internal carbon footprinting analysis currently covers scope 1 and scope 2 emissions7 of the Australian shares, international shares, unlisted and listed property, and unlisted and listed infrastructure asset classes.8 This work informs our integration and stewardship activities described above.
- Global Warming of 1.5°C, an IPCC special report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty. www.ipcc.ch/sr15
- As at 31 December 2021. Excludes indexed, quantitative and transition portfolios. Portfolio emissions are based on the proportion of emissions we own of each company (apportioned emissions; which is calculated based on our ownership level and the company’s scope 1 and 2 emissions). Our actively managed portfolios represented around 82% of the Australian shares asset class and emissions data covers approximately 96% of the value of these portfolios.
- Where data is available as at 31 December 2021. Coverage rates for each asset class vary subject to data availability. Unlisted property includes operational assets only.
- Our actively managed portfolios represented around 82% of the Australian shares asset class as at 31 December 2021 and emissions data covers approximately 96% of the value of these portfolios.
- Source: S&P Global/Trucost ESG Analysis, Australian and international shares portfolio data, 30 June 2013, 30 September 2015–2021. Carbon to value invested: CO2 emissions per AUD million invested. Includes scope 1,2 and direct upstream scope 3 emissions.
- Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased electricity, heat or steam.
- Asset classes measured as at 31 December 2021. Asset classes we have not measured at this date include private equity, fixed interest and cash.