UniSuper has been sending template responses to members contacting the fund about the UniSuper DIVEST campaign.

The fund has sought to present it’s current approach as a sufficient response to climate change and the risks it poses, while shirking responsibility for taking a clear, fund-wide stance against the expansion of the fossil fuel sector.

We know many UniSuper DIVEST signatories are discussing these issues with the fund and fellow members, so we’ve prepared the following points to help you respond to UniSuper’s greenwash.

Will UniSuper be divesting from fossil fuel companies?

UniSuper: “We prefer company engagement over divestment and expect that all companies reduce their emissions to meet the goals of the Paris agreement. As a shareholder (especially a large shareholder), we’re able to engage with companies to encourage them to do better and to be more efficient. We can also ask them to inform investors and the wider community about what they are doing to improve their practices or to reduce their risk moving forward.”

Our response: The UniSuper DIVEST campaign calls for divestment from companies that are actively expanding the coal, oil and gas sectors, which need to decline if we are to avoid the worst impacts of climate change. No amount of engagement with such businesses is going to bring them into line with a 1.5°C warming limit. For any fund wanting to align its portfolio with the Paris climate goals, divestment from such companies is essential. Moreover, years of company engagement has clearly been ineffective.

What can I do if I don’t want my funds to be invested in fossil fuels?

UniSuper: “If members wish to remove their exposure to fossil fuels, they have seven options available. Sustainable High Growth, Sustainable Balanced, Global Environmental Opportunities, Global Companies in Asia, Listed Property, Australian Bonds and Cash. Our three sustainably themed options (Sustainable Balanced, Sustainable High Growth and Global Environmental Opportunities) combined have over $6 billion under management, making UniSuper Australia’s largest superannuation investor in sustainably themed investment products.”

Our response: UniSuper is shifting responsibility for climate action onto its members when it needs to take action across the entire fund. This approach requires members to actively seek out and switch into funds that match their values. As a result, just a small percentage of UniSuper’s assets under management are invested in fossil fuel free portfolios, leaving billions of dollars invested in coal, oil and gas companies. By failing to take a fund-wide stance against fossil fuels, UniSuper remains complicit in the expansion of the industries that are driving dangerous global warming.

How does UniSuper manage climate risks from an investment perspective?

UniSuper: “As a responsible investor, we asses environmental, social and governance (ESG) factors as part of the investment analysis, management and decision-making process. We have a number of sustainable investment options which exclude any exposure to alcohol, gambling, weapons and fossil fuel explorers and producers. We pride ourselves on carefully managing our sustainable and environmental options to ensure they deliver strong environmental outcomes and good returns.”

Our response: UniSuper does not explain why it does not carefully manage ALL investment options to ensure they deliver strong environmental outcomes and good returns.

The fund’s response seems to suggest climate risk is only properly managed in the sustainable options. Perhaps UniSuper needs to review Noel Hutley’s 2017 legal opinion, which states: “It is the treatment of climate change as a financial risk (as distinct from the treatment  of climate change as a environmental, social or governance issue) that trustee directors ought consider in an appropriate case when fulfilling the requirements imposed by the SIS Act.”

The Responsible Investment Association Australasia has noted, “Increasingly financial analysts are raising the alarm about the growing financial risks of investing in fossil fuels posed by structural decline, stranded assets and a carbon bubble.” Mercer’s 2019 research demonstrated the increasingly negative economic outcomes of warming scenarios that fail to meet the climate goals of the Paris Agreement, stating: “Fiduciaries – motivated by the economic and social interest of their beneficiaries and clients – have the opportunity, and arguably the obligation, to use their portfolios and their influence to help guide us towards this more-economically-secure outcome.”

With over 100 major financial institutions and the likes of BlackRock, the world’s largest fund manager ($6.9 trillion), acting to restrict fossil fuel investments, UniSuper needs to explain how it will uphold its fiduciary duty in this fast-changing economic context.

Sustainable Development Goals

UniSuper: “UniSuper has many investments with direct links to the Sustainable Development Goals (SDGs) including over $1b in water infrastructure and timber plantations…”

Our response: Whilst sustainable investments are to be applauded and encouraged, on their own without divestment from fossil fuels, they will not avert climate catastrophe. The fact UniSuper still has a significant investment in companies whose operations are incompatible with the goals of the Paris Agreement shows UniSuper is NOT playing its role in fighting runaway climate change.

Is 12% of UniSuper’s portfolio invested in fossil fuel?

UniSuper: “As disclosed in our ‘Climate risk and our investments’ report, the Fund’s overall exposure to companies with involvement in fossil fuels was 12% as at 30 June 2019. However, these companies have a diversified range of business activities, which do not entirely relate to fossil fuel exploration and production. Using this measure, we note that collectively 6% of our funds’ assets were directly related to fossil fuel exploration and production business activities, the majority is gas, with less than 1% related to thermal coal.”

Our response: As at 30 June 2019, UniSuper had $83 billion under management, so the “6% of our funds’ assets were directly related to fossil fuel exploration and production business activities” equates to around $5 billion. That’s $5 billion of members’ money directly supporting fossil fuel activities that are undermining the Paris climate goals.

Further, any investment in a company is vote of support for its business model. The fund’s remaining $5 billion (6%) exposure to companies with fossil fuel operations therefore also undermines efforts to limit climate change.

Proxy voting record

UniSuper: “UniSuper has excellent access to the board and management of companies within Australia and we are able to use direct engagement to encourage company action on managing climate risks. The companies that have had shareholder resolutions lodged have either met, or committed to meet within a year, the items outlined in the resolutions…”

Our response: UniSuper should be doing both; ie, voting for climate change resolutions AND engaging in meaningful dialogue with company executives. As  negotiations with Boards and Management are conducted in private, we have to take their word for it that UniSuper is encouraging transition away from fossil fuels.

Further, UniSuper’s claim that companies have met or committed to meet resolution requests is false. In 2019:

• AGL was asked to disclose Paris-aligned emissions reduction and coal power phase out plans but did not commit to producing these plans.
• Origin Energy was asked to set Paris-aligned goals and targets, and to phase out coal power by 2030 but did not commit to these measures.
• ANZ, NAB and Westpac were asked to disclose targets to reduce exposure to ALL fossil fuels. Westpac and ANZ did not make any commitments to any fossil fuel exposure reduction targets while NAB only committed to a thermal coal phase out that is out of line with Paris.
• QBE, Suncorp and IAG were asked to disclose targets to reduce exposure to ALL fossil fuels but only committed to phase out thermal coal exposure, providing no oil and gas reduction targets.
• Rio Tinto was asked to disclose targets to reduce Scope 1, 2 and 3 greenhouse gas emissions but only committed to disclosing Scope 1 and 2 targets, failing to commit to targets for its Scope 3 emissions.

Returning to the first point above, engagement can not bring a company whose businesses model relies on expanding fossil fuels into line with the Paris climate goals. In such cases, divestment is the only effective option.