UniSuper, Australia’s fifth biggest pension fund, adopted a first fossil policy following months of public campaign by Market Forces last week. Despite being the pension fund of Australia’s academics, scientists and researchers, many of whom work on climate change, UniSuper new policy contains lofty words despite being quite weak in reality since it only covers the coal mining sector, and remains vague regarding oil&gas.
1. What’s new ?
UniSuper published on September 14th a new page on its website entitled ”A sustainable path to 2050”, detailing some climate measures, including the following ones:
- the exclusion of companies that generate more than 10% of their revenues from thermal coal mining
- the commitment to have 100% of portfolio companies to have Paris-aligned operational commitments by the end of 2021
- the commitment to achieve net-zero absolute carbon emissions in its investment portfolio by 2050, in alignment with the Paris Agreement
2. Our analysis
a. Coal: missing half the picture
The only concrete commitment in UniSuper announcement lies in the exclusion of mining companies that generate more than 10% of their revenues from thermal coal. UniSuper becomes the third Australian pension fund to adopt such an exclusion threshold only on coal mining. It aligns itself with HESTA, which adopted a 15% exclusion threshold in 2018, and First State Super, which adopted the same 10% threshold earlier this year.
It unfortunately follows and replicates the same giant loophole in its policy: to purely and simply overlook the coal power sector, more than half of the industry. The Global Coal Exit List, the most comprehensive database of coal companies globally managed by our german partners urgewald, contains indeed 237 coal mining companies, but also 361 coal power companies which will not be impacted by this new policy.
This is why UniSuper score on the Coal Policy Tool will only change on one out of four criteria, the relative exclusion threshold criteria, from 0 to 2, because of its very partial coverage of the coal industry.
UniSuper’s scores in the Coal Policy Tool
This table shows the scores of UniSuper coal policy on 5 criteria of the Coal Policy Tool.
UniSuper should at minimum align itself with its peer NEST, the UK pension fund which adopted a 20% exclusion threshold not only applying to coal mining but also to the coal power sector in June, earlier this year. It also adopted a mandatory requirement to remaining companies to adopt an exit plan from the coal sector by 2030, and a commitment to lower its exclusion threshold over time.
>>> To have a comprehensive coal policy, UniSuper must cover the coal power sector, exclude all coal developers, adopt some absolute exclusion thresholds and a comprehensive coal phase-out strategy by 2030 in the OECD and 2040 worldwide.
b. Fossil fuels: too vague
UniSuper did not adopt any commitment on oil and gas. However, it made a commitment that should imply a review of its investment strategy in the oil and gas sector.
UniSuper committed to net-zero absolute carbon emissions in its investment portfolio by 2050, and to have 100% of the companies in its portfolio to have Paris-aligned commitments by the end of 2021. However, the scheme does not mention what “Paris-aligned commitments” means… This leaves a very important risk given the uncertainties already mentioned regarding its other but related commitments. The asset owner indeed simply “assumes” that the economy will be decarbonised enough by 2050 for it to build a net-zero portfolio at that time. It will also target an absolute reduction in emissions at a portfolio level by 2030 but only “where practical”, without giving any details on what it considers “practical”.
>>> The litmus test for assessing the short-term credibility of UniSuper new commitments will be to know whether the pension fund continues to invest in companies still planning to expand the fossil fuel industry, which is the clearest signal that such a strategy is not Paris-aligned, as explained in the recently published “Principles for Paris-aligned financial institutions”.
On top of stopping this expansion, UniSuper must also divest from companies holding more than 15% of their reserves in oil sands, shale oil and gas, and/or Arctic and deep water extraction, and commit to gradually phase-out from the oil and gas sectors by 2040 at the latest in OECD countries and by 2050 elsewhere.
3. Our conclusion
As the pension fund of Australia’s academics, scientists and researchers, UniSuper could have set a precedent in Australia in terms of fossil fuel divestment. With over 60 billion USD of assets under management, the scheme was ideally positioned to take the lead and set the best practice in the sector to push other financial players. Unfortunately, its latest announcements prove to be an unfortunate example of what other investors should avoid in the future: many general and vague commitments raising a lot of questions, and few very concrete commitments.
If it is fundamentally a good thing to commit to net-zero alignment by 2050 and to have a medium-term target by 2030, these measures are not sufficient enough in themselves to have an immediate concrete impact in the real world. By blacklisting only coal mining companies and not even coal developers, UniSuper falls very short from this. It could greatly improve its policy by using the right definition of “Paris-aligned operational commitments” by divesting immediately from companies still planning to expand the fossil fuel industry, and by requiring remaining ones to adopt by the end of 2021 fossil phase-out plans with Paris-aligned specific deadlines.