Progress on our climate commitments and engagement efforts
Read about the progress we’ve made by engaging with the companies we invest in, towards net zero.
Our sustainable path to 2050
Our influence is strongest when dealing with the companies we hold in our Australian portfolios, which our in-house team manages. We regularly engage directly with company management and boards to support a Paris-aligned decarbonisation transition.
To support our own net zero target, when we announced it in September 2020, we set:
- a 2030 target to contribute to a 45% reduction in Australia’s emissions, and
- a short-term goal for our top 50 Australian investments (which we call our ‘Portfolio Companies’) to set Paris-aligned operational targets by 31 December 2021.
Our expectation for these companies was that they commit to at least:
- a net zero operational emissions before 2050
- an endorsed Science Based Target (SBTi), or
- a 45% emissions reduction by 2030.
Examples of the actions Portfolio Companies should be taking include:
- An understanding of the climate risks embedded in their assets/businesses.
- A proactive approach to reducing emissions aligned with the Paris Agreement.
- Transparent disclosure that explains what activities and actions they’re taking to manage climate risks and opportunities.
How do we track progress?
Each year we release a climate risk report, Climate risk and our investments, and set out the decarbonisation commitments of our Portfolio Companies.
We score them using a ‘traffic light’ system.
- Green indicates that the company meets our expectations for Paris-aligned targets
- Amber indicates that the company has set some targets and, while they’re reasonably ambitious, they aren’t enough to meet our expectations
- Red indicates that the company hasn’t set a Paris-aligned target.
When we published Climate risks and our investments in 2021, seven of our Portfolio Companies received an amber light, and five of them had committed to setting targets by the end of the year.
An update on progress
Of the five companies who’d committed to set targets by the end of 2021, four (ASX, SEEK, JB Hi-Fi and Endeavour) have now done so. The remaining company, Axicom, is currently going through a sale process which has delayed its target-setting process.
Table: Progression of our Portfolio Companies at 31 December 2021*
|Traffic light score||2020 baseline||30 June 2021||31 December 2021|
|* Portfolio Companies change due to market movements and investment decisions.|
Amber companies at 31 December 2021 were:
- James Hardie and Cleanaway (who have set challenging targets that don’t quite meet our expectations)
- Oz Minerals (which has set a target of net-zero operational emissions by 2030, but unfortunately missed our reporting deadline of 31 December 2021).
Red light companies at 31 December 2021 were:
- Prospect Water
- Reliance Worldwide.
Although these red light companies are yet to announce decarbonisation targets, we’ve seen progress following our engagement with them. We continue to work with and encourage them to decarbonise their operations and formally adopt Paris-aligned targets. For example, Reliance Worldwide is in the process of setting up systems and processes to better measure emissions across their operations so they can set targets.
We're engaging with companies
We developed our short-term target to prompt greater ambition from our Portfolio Companies and to demonstrate the effectiveness of our engagement. We’re pleased with the progress we’ve made against this target, and we’ll continue to engage with these companies as we work together to achieve the ambitions of the Paris Agreement.
In future, we’ll make our traffic light report more comprehensive so that it can demonstrate the actions companies have taken to achieve real emissions reductions.
If we’re still dissatisfied with a company’s decarbonisation approach and progress, we’ll continue to engage—both individually and collectively—with like-minded groups.
Our escalation strategies include:
- supporting shareholder resolutions to strengthen climate action
- voting against company director(s) or remuneration reports
- divestment—especially where a lack of action represents a material risk to the organisation and there is no viable decarbonisation pathway.