19 August 2021
Engagement with companies sees increased decarbonisation commitments and exposure to fossil fuel has been halved, according to UniSuper’s latest Climate Risk report.
UniSuper, the $100 billion superannuation fund, has made significant progress on its commitment to net-zero emissions, with 40 of its top 50 Australian investments setting Paris-aligned targets (up from 34 last year) and a further five committed to setting targets by the end of 2021.
Writing in the fourth edition of the annual UniSuper Climate Risk report, Chief Investment Officer, John Pearce said UniSuper is actively managing its investments and operations to reduce carbon emissions in line with the Paris Agreement.
Mr Pearce said decarbonisation of the economy is one of the most significant investment themes for at least the next decade and that the corporate sector’s response to the challenges and opportunities of climate change is playing a major role in this.
“There is no doubt in my mind that the collective action of large investors like UniSuper has played a significant role in driving that behaviour. We strongly believe that engaging with companies and helping them progress toward these targets represents a more meaningful contribution to achieving the Paris goals than divestment – which effectively transfers fossil fuel exposures.”
The key updates revealed in the latest Climate Risk report include:
- 40 of the top 50 portfolio companies (up from 34 in 2019-20) have set operational targets to meet the Paris 2050 climate targets, and another five committed to setting targets this year;
- Across the entire portfolio, 66% of investments now have Paris-aligned targets (up from 51% 12 months ago);
- 0.4% of the fund is exposed to fossil fuel extraction, with overall fossil fuel exposure down to 2.55% from 5.05% last year;
- 26% of the portfolio is, or will be, carbon neutral or net-zero by 2022 including the $2.6 billion direct unlisted property portfolio;
- The fund's operations achieved carbon neutral status in 2021.
Mr Pearce said the progress had been achieved by divesting some positions, eliminating holdings in companies that generate more than 10 per cent of revenue from mining thermal coal and not adding to existing positions as the portfolio has grown.
Across its diversified investment options UniSuper has also maintained carbon intensity at least a third below market benchmarks, while a shadow carbon price has been applied to the fund’s top 50 Australian holdings to highlight the pressure points in the portfolio.
UniSuper has seen strong demand for its three dedicated ESG investment options (designed to avoid companies involved in the production, generation, or transmission of coal, oil or gas) with over $12 billion in funds under management across these options, solidifying the fund’s position as Australia’s largest investor in ESG-themed strategies. The Global Environmental Opportunities (GEO) option, investing in companies who earn most of their revenue from providing environmental solutions, was the fund’s top performing option of the last financial year delivering returns of 48.9%.
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Note to editors
UniSuper is one of Australia’s largest superannuation funds, and is run solely for the benefit of its members. For more than 35 years, UniSuper has been managing super for people employed in the higher education and research sector. UniSuper currently invests around $100 billion on behalf of more than 450,000 members.