The first major Australian industry superannuation fund advised on Friday they were restricting thermal coal investment due to the growing risk of 'unburnable carbon' with the growing global push to limit global warming.
HESTA, the super fund for employees in health and community services, announced a progressive implementation of a restriction on investments in thermal coal, across all it's funds, not just it's ethical fund. HESTA has $29 billion under funds management with 785,000 members and 155,000 employers.
Anne-Marie Corboy, HESTA Chief Executive Officer, said that this was an increasing restriction as part of the Fund’s ongoing response to the increasing impact of climate change on its long-term investments. In a media statement she commented:
“This ‘unburnable carbon’ is likely to become an increasing risk in the medium to long term, especially for companies heavily invested in thermal coal, or those seeking to develop new long-term assets.
“HESTA is of the view that, new or expanded thermal coal assets face the highest risk of becoming stranded before the end of their useful life.
“It is not prudent, nor in the long-term interest of members, to invest in the expansion of these assets.
“The push to limit the impact of global warming requires economies to move to a lower-carbon intensive future and investors have an important role to play in this transition.
“HESTA believes that further investment in developing new, or expanding existing, thermal coal reserves is inconsistent with this imperative to reduce carbon emissions.”
HESTA were ranked at No 29 with a BBB rating in the Asset Owners Disclosure Project global climate rating index for 2013/2014, with the previous year being ranked at 27.
With the new restriction HESTA will not make new investments in unlisted companies or newly listed companies that derive more than 15% of revenue or net asset value from exploration, or new or expanded production, of thermal coal.
Also, HESTA will not participate in the provision of direct funding via rights issues or share placements to already listed companies for expenditure on business expansion in any of these activities.
Divestment from high carbon assets growing
There is a growing carbon and climate risk divestment movement globally and in Australia lead by 350.org and local campaigners Market forces with their Divestment Day and superswitch campaigns.
Early this year there was an announcement by Sydney University for an investment ban on coal after a campaign. There was also a decision taken on divestment from fossil fuel mining by Uniting Church of Australia.
In the USA divestment from coal by Stanford University has lead the charge.
Economist and former leader of the Liberal Party John Hewson outlined the issue of changing superannuation and pension fund investment at the Festival of Dangerous Ideas in Sydney which a forum on Your Superannuation is Destroying the Planet.
Green Imperialism at it's worst says Whitehaven CEO
The growing divestment campaign has also met strident criticism. Whitehaven Coal CEO and Managing Director Paul Flynn label this growing movement as "green imperialism at its worst". In a report in the Sydney Morning Herald after the Sydney University divestment announcement in August 2014 he accused divestment campaigners of being selective with facts, "I wouldn't tell people how to invest their money and they shouldn't purport to be doing that either. Obviously that side is very selective in the facts that they use, it doesn't suit them to have a broader discussion about all the facts."
Whitehaven Coal is developing the Maule's Creek open cut coal mine destroying a large portion of the Leard State forest that activists have been campaigning against which will result in the emission of approximately 30 million tonnes of CO2 per year. Jonathon Moylan's ANZ Bank hoax letter in January 2013 raised the campaign profile against Whitehaven's Maules Creek coal mine which was approved by the the Gillard Labor Government's Environment Minister Tony Burke in February 2013.
The Carbon bubble and stranded assets
A number of academically researched reports have focussed on climate risk and the carbon bubble. The Carbon Tracker report on Unburnable carbon in 2012 highlighted the investment danger of a carbon bubble. In 2013 Carbon Tracker and the Grantham Research Institute on Climate Change and the Environment at LSE produced the report Wasted Capital and Stranded Assets in 2013 which highlighted the serious issues of stranded assets caused by the carbon bubble and the increasing global efforts to limit global warming.
A report from the Smith School of Enterprise and the Environment at Oxford University in December 2013 highlighted that Australia's headlong expansion of coal mining for export carries substantial investment risks of stranding assets.
HESTA has responded to this growing concern by ensuring the long term risk to members retirement savings is reduced. This doesn't mean they have divested altogther from fossil fuels, but they have instructed their investment mangers to reduce the investment exposure to thermal coal.
“Companies heavily invested in thermal coal face the highest ‘unburnable carbon’ risk, based on the size of existing proven coal reserves, the higher carbon intensity compared with other fossil fuels, and the increasing viability of substitutes for power generation, including renewable sources,” Ms Corboy said.