For super funds and their advisers

… and Aware hammers home need for action

5 Zali Steggall_Web

The debate over climate change has been too polarised along political lines, says politician Zali Steggal. It should be about setting hard targets, says one of Australia’s biggest investors, Damian Graham.

Graham, the CIO of Aware Super, and Steggall, the conservative independent federal MP for Warringah in Sydney, joined with three others for a webinar discussion on climate change action last week (November 25). The others were: Deanne Stewart, the chief executive of Aware; Wai-Shin Chan, the co-head of ESG research at HSBC and head of the Climate Change Centre of Excellence; and, Mark Lewis, chief sustainability strategist at BNP Paribas Asset Management.

Stewart gave her strong endorsement for Steggall’s ‘Climate Change Bill’, currently before the House Standing Committee on Environment and Energy. She said: “As a long-term investor, there’s a lot to like about the Bill… It provides for a framework, an action plan, risk assessment, continual updating and monitoring and reporting. That’s what we’re doing as a major super fund.”

She also said she liked the idea to set up an independent climate change commission. “It’s pragmatic and very workable, with more predictability for investors,” Stewart said.

Graham, who was instrumental for the fund to become possibly the first to set immediate targets for action as well as an overall commitment to be net carbon neutral by 2050, said the setting of hard targets and associated activities was crucial to positive outcomes.

“A lot of companies identify that the risks are there and that they need to address them as part of their good governance. A lot of companies are setting targets and a lot of companies we’re engaged with are well advanced,” he said.

“But there’s a paralysis which is so unhelpful because epeople don’t know what the rules will be. But that’s not stopping business from moving that way. We’re targeting 30 per cent less carbon in equities by 2023.”

Graham said later in the discussion that Aware had actually already beaten the 2023 target, hitting a 40 per cent reduction, following the fund’s introduction of a custom-made index (through MSCI) which had allowed it to focus on the largest carbon emitters globally. The index contains the 60 companies representing about 50 per cent of all emissions, giving Aware the capability of selecting those with the best risk/return outcomes.

BNP’s Mark Lewis said that the renewable energy revolution was kickstarted in Europe by government targets and as new technologies rolled out, governments set more ambitious targets. “That’s how we were able to get agreement in Paris in 2015,” he said. Since then, there have been further cost reductions and we are seeing a further loop back between the private sector and governments.”

He said that there was a lot of money invested in sectors which had traditionally seemed safe, such as the utilities sector. But between 2008-2016 prices in the sector fell 80 per cent, although it had climbed back a bit since. In some regions and some industries business was ahead of governments.

HSBC’s Wai-Shin Chan said that while setting a goal was meaningful, achieving net zero was not that easy. “It will require planning and adjustments,” he said. “Not every net zero target published is the same, for instance. Importantly we need to keep the direction of travel in mind. This is not the final destination.”

He agreed that a lot of rules for companies had not been set but to be a leader in setting your own goals was good for your organisation. “You may take a slight hit now in the business, but it will set you up for benefits in the future.”

Asked about certain politicians labelling industry funds “climate activists”, Stewart said that funds would not be adhering to the sole purpose test without addressing climate change risks. “It’s not activism. You are putting members at risk if you don’t address climate,” she said.

Steggall said: “My goal as an independent is to find a pathway down the middle, so [the bill] can attract both sides of parliament. It requires five-year plans and incremental budgets, while politicians tend to focus on the next election. People want the Government to get on with a plan. They’re tired of partisanship… Over 80 per cent of Australians are concerned and want action on climate change. If we keep the handbrake on, we’ll miss out on the opportunities of the future.”

– Greg Bright

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