20 August 2021

UniSuper’s latest Climate Risk and Our Investments report has revealed the fund has been quietly pulling investments from oil and gas producers. It has significantly sold down its stakes in climate-destructive companies like Woodside, Oil Search, Santos and Enbridge. The fund halved its investment exposure to fossil fuels over the past year, equating to well over $2 billion being pulled from the sector in a year.

The fund now has no pure-play (undiversified) fossil fuel producers listed in its top 50 Australian holdings, and it appears any remaining exposure to these companies is only through passive investments. UniSuper does, however, retain significant investments in BHP and South32, which are diversified mining companies with significant fossil fuel activities, and APA, a gas pipeline company with big expansion plans.

Like thermal coal before it, UniSuper has seen the writing on the wall for the oil and gas sector. This latest move should be seen as a vote of no confidence in oil and gas producers, which continue to pursue rampant expansion in the face of clear science telling us the industry must rapidly decline if we are to avoid the worst impacts of climate change.

The IPCC’s recent Sixth Assessment Report presented a sobering look at the dire state of the climate, making clear the scale and pace of action required to avoid the most devastating impacts of global warming. According to the report, every fraction of a degree of further warming will see increasingly severe and prolonged heatwaves, droughts and extreme rainfall events, with devastating impacts on humans and ecosystems.

Meanwhile, the International Energy Agency’s Net-Zero Emissions by 2050 report has given us the best insight yet of the energy transition required to give us a fighting chance of limiting warming in line with the Paris Agreement’s climate goals and avoiding some of the worst climate change impacts. 

UniSuper’s fossil fuel sell-down represents significant progress in the campaign calling on the fund to divest from all companies expanding the scale of the fossil fuel sector, and reward for the  efforts of the 15,000 members that have joined the campaign so far.

But the job isn’t done yet. UniSuper must confirm this divestment from fossil fuels is a one way street, and that it will not be actively reinvesting members’ money in the likes of Woodside and Santos.

The fund also continues to endorse the greenwash of many of its remaining portfolio companies. UniSuper’s report claims the vast majority of portfolio companies have made ‘Paris-aligned commitments’. Yet many of these companies have climate plans and targets that are nowhere near Paris-aligned, if they have them at all.

Key takeaways from the report

• UniSuper’s ‘look-through’ fossil fuel exposure has halved over the past year, continuing a trend since 2019
• Significant drop in exposure to Australian pure-play oil and gas producers Woodside, Santos, and Oil Search
  • Woodside and Oil Search have dropped out of UniSuper’s list of ‘portfolio companies’, meaning they’re no longer in the fund’s top 50 Australian holdings, and exposure to these companies appears to only be through passive investments (as per website definition of ‘portfolio companies’)
  • Now no Australian pure-play oil and gas producers in list of ‘portfolio companies’, and just one diversified oil and gas producer, BHP
  • “Our investment in fossil fuel explorers and producers has reduced over the last year… driven by various considerations, including emerging global energy trends, increased financial risks and our assessment of value.”
• Significant drop in exposure to APA, although holding is still large. APA is planning to expand its gas pipeline network, including a project that would unlock Santos’ Narrabri gas project, which is vehemently opposed by Gomeroi Traditional Owners, farmers and climate experts. This APA investment appears inconsistent with UniSuper’s Santos divestment, given APA is so closely connected to Santos’ expansion plans. 
• Table of fossil fuel exposures suggest complete divestment from Enbridge and TC Energy, although comment on page 13 states UniSuper “sold most of our holdings” in these companies
  • Fund recognised “…the threat from decarbonisation is increasing and [Enbridge and TC Energy] do not have an obvious pathway to Paris alignment.”
• Will be placing an effective cap on fossil fuel exposure, but won’t disclose it until next year’s climate risk report
• Started implementing a carbon price of USD $50/t in analysis of some companies, but not necessarily using that to make investment / divestment decisions yet
• While pure-play fossil fuel producers have been removed from portfolio companies, many companies on the list are getting green ticks for ‘Paris-aligned commitments’ despite having near- and medium-term plans and targets that are nowhere near Paris-aligned, if they have them at all.
  • Eg. Rio Tinto – target to reduce emissions by 15% from 2020 to 2030
  • BHP – target to reduce emissions by 30% by 2030
  • Big banks – none have fossil fuel lending targets / commitments in line with Paris, other than in relation to thermal coal
  • Note UniSuper’s own statement that emissions need to be reduced by at least 45% by 2030, while the latest climate science suggests cuts need to be much deeper

Read UniSuper’s full report here

[1/3] The latest edition of @UniSuperNews' Climate Risk Report shows the fund halved its investments in fossil fuel companies over the last year, significantly cutting its stakes in dirty companies like @WoodsideEnergy @OilSearchLtd @SantosLtd https://t.co/N1rA4P3BXf

— Market Forces (@market_forces) August 19, 2021