Industry super fund Hostplus has launched a new Socially Responsible Investment (SRI) option, which “seeks to limit exposure to companies which have a material exposure to the most carbon intensive fossil fuels.”
While this is a long way from the level of divestment action we would advocate, the new fund at least gives the one million-odd Hostplus members a less fossil fuel intensive option.
Hostplus has confirmed the new option will be managed by AMP through their Responsible Investment Leaders fund. We know that AMP RIL excludes companies with material exposure to thermal coal mining, oil sands and brown coal power generation. However, we also know AMP RIL had over 10% of its equities portfolio invested in fossil fuel companies as at 30 June 2016, including numerous oil and gas companies like Shell, Santos and Oil Search.
AMP RIL doesn’t have any pure-play coal investments, but does hold shares in major polluters like AGL, as well as diversified companies with major coal operations, including BHP Billiton, Aurizon, Rio Tinto, South32 and Wesfarmers.
So while Hostplus may have taken a step towards addressing climate change in this new option, it’s more of a begrudging shuffle than an enthusiastic leap.
The fund’s decision to quarantine climate action within the new option is also problematic. It assumes all members who want to reduce their exposure to fossil fuels are engaged and informed enough to switch into the new option. Polling tells us around a third of super fund members would be prepared to shift their super out of funds that invest in coal and coal seam gas. But we know many don’t go through with the switch due to a lack of engagement and understanding about the different investment approaches offered.
We need to see more funds instituting policies and taking concrete steps to reduce fossil fuel exposure across their entire portfolios. Addressing climate change and its associated risks in just one ‘sustainable’ option – as Hostplus have done – may be of some benefit to a small group of engaged members, but fails to tackle the problem for the majority.