“I would recommend superannuation members shop around to make sure that investment decisions are being made in their best interests, not to support the ideological cause of their fund’s executive.”
First State’s move to divest thermal coal miners, which has won widespread praise from climate-conscious investor groups and environmentalists, is the latest setback for the coal sector following pledges by a growing number of institutional shareholders to reduce their exposure to the fossil fuel.
The world’s largest asset manager, BlackRock, this year announced a partial retreat from thermal coal investment citing climate change concerns. HESTA, the Australian super fund for healthcare workers, has also divested its thermal coal holdings as part of its plan to be a “net-zero” emitter by 2050.
First State, which is targeting emissions cuts of 30 per cent by 2023 and 45 per cent by 2030, said divesting from thermal coal was an “important first step”. “But we recognise there is more to do, which is why we have committed to bold actions and real targets to shift the dial on climate change which will assist us to continue to deliver strong sustainable long-term returns to our members,” First State chief Deanne Stewart said.
While the $130 billion fund did not specify which stocks will be dumped in October, its portfolio includes ASX-listed coal miners such as Whitehaven, New Hope and Washington H. Soul Pattinson.
“We have seen over the past 10 years significant volatility in value of thermal coal mines,” Ms Stewart said. “Increasingly, insurance companies are signalling their intent to exit this sector in response to medium-term climate-related risks.”
Dan Gocher, head of climate at the Australasian Centre for Corporate Responsibility, a shareholder activist group, said First State’s new climate plan was a “solid commitment” and “another sign that everybody is seeing the end of coal”.
While consumption of thermal coal has been falling, the International Energy Agency said it expected it to increase in the coming years as demand for electricity in developing countries outpaced the shift to renewable energy in industrialised nations.
Australia is the second-largest producer of thermal coal after Indonesia. Last year, thermal coal exports accounted for $26 billion in export income. However, the federal government forecasts earnings will shrink to $19 billion by 2020-21 as lower prices offset higher export volumes.