As a responsible long-term investor, we focus on the risks and opportunities that impact an investment’s ability to achieve returns, as well as how they affect the world our members retire into.
Climate change is an important issue for investors. It has the potential to impact the financial returns of investments over the medium to long-term.
Climate change issues can impact an investment in the following ways:
As a large global investor, with investments across a range of geographic regions, economies and asset classes, HESTA cannot diversify away from climate change impacts.
Because climate change has the potential to impact investment risks and returns, we consider it alongside traditional financial and business risk factors in making investment decisions.
OUR APPROACH AND OUR ACTIONS
In response to the increasing importance of climate change to investments, HESTA has a dedicated Climate Change Policy that outlines our principles and commitments in relation to incorporating climate change considerations into our investment processes and decision-making. For more information, please read HESTA's Climate Change Policy.
We address climate change risks and opportunities in a number of ways, including:
INVESTOR GROUP ON CLIMATE CHANGE (IGCC)
Since its inception, HESTA has played an active role in the IGCC. The group has grown to represent Australian and New Zealand institutional investors with total funds under management of approximately $2 trillion, and others in the investment community, who are interested in the impact of climate change on investments.
The IGCC aims to encourage government policies and investment practices that address the risks and opportunities of climate change, for the ultimate benefit of members. Currently we are represented on the IGCC Management Committee and are active on working groups. You can find further information on the IGCC website.
Measuring the carbon footprint increases our knowledge and understanding of carbon risks or opportunities in our investments. In 2015, we started measuring the carbon footprint of the listed equities component of our investment portfolio. We expanded this to include our property portfolio in 2017 and our infrastructure portfolio in 2018.
At 30 June 2018:
HESTA's Australian equities investment is 1% more carbon intensive than the benchmark (S&P/ASX 300), partly due to being underweight in banks and therefore comparatively overweight in more emissions intensive sectors.
HESTA's international equities investment is 1% more carbon intensive than the benchmark (MSCI ACWI ex Australia) due in part to a decline in the carbon intensity of the index over the past few years.
HESTA's property investment is 5% more carbon intensive than in 2017, and 19% less carbon intensive than in 2016.
The carbon footprint of HESTA's infrastructure investment for Australian and international assets is comparable to peers, as measured by GRESB.
HOW IS CARBON DATA COLLECTED AND CALCULATED?
The carbon footprint of our Australian and international equities investments is calculated using total tonnes CO2e / $ million invested. Total tonnes CO2e is calculated by summing the Scope 1 (direct) and Scope 2 (indirect) carbon emissions for companies in which we invest and then multiplying this by the percentage holding in that company. The total tonnes CO2e are then divided by the total investment dollars in each investment.