Big-name super fund backs out of fossil fuels

By Stephanie Aikins

November 27 2018
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An industry super fund has announced its divestment from fossil fuels, contradicting its statements from earlier this year.

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Industry super fund Vision Super yesterday announced it will be divesting from thermal coal and tar sands producers, alongside tobacco.

Chief executive officer Stephen Rowe said the decision had been made by the board after listening to the views of its members through member forums, feedback and surveys.

“As a values-based fund, environmental, social and governance factors are important to us when we decide how to invest,” he said.

“Our ESG decision-making framework looks first to reduce harm through active ownership of shares, and the board will only decide to divest if the evidence is clear that the harm of a particular product cannot be reduced."

However, in a report released in January this year, Vision Super said divesting from fossil fuels “doesn’t achieve anything” as demand in Australia means the act is nullified by the interest of other investors.

“As long as Australia is dependent on fossil fuels as an energy source, other investors will step in when some divest from these assets, so there is no net benefit to the environment of divestment,” the report said.

The divestment adds on to Vision Super’s existing exclusion of controversial weapon assets and continues on from the companies focus on reducing investment in companies with high carbon exposures.

As of the start of this year, the carbon intensity of Vision Super’s equities portfolio was close to 25 per cent lower than the index.

“[T]hermal coal and tar sands are two of the biggest contributors to climate change, and we don’t believe the risk of continuing to use them can be mitigated,” Mr Rowe said yesterday.

“Report after report tells us that if we don’t act now to keep temperature increases contained, future generations will suffer. So, the board made the decision to exclude these.”

In the report released in January, Vision Super said it was near impossible to “realistically invest in anything that doesn’t use fossil fuels”.

“Even if you’re investing in solar technology, producing those panels in the first place takes electricity from fossil fuels. There’s no escaping it. Everything that uses electricity, everything that needs transporting – dig deeply enough into it and you’ll find fossil fuel use,” the report stated.

It suggested activism, through lobbying the federal government and global agencies to improve fossil fuel policies, was more effective than divestment.

Prior to the announcement of the divestment, Vision Super said it would focus on lobbying government and voting at shareholder meetings for companies to reduce their fossil fuel use as the ways it would combat the issue.

Vision Super is currently working on a strategy for selling excluded stocks out of the portfolio.

The materiality threshold for divestment has been set at 25 per cent of revenues, with a buffer of +/-5 per cent.

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