Australian share investments and disclosure

‘Fine’ is the percentage of a super fund option’s ASX 300 equities* investments that we know to be invested in companies that have demonstrated alignment with the Paris climate goals, or whose operations are not overtly inconsistent with the Paris climate goals.

‘Borderline’ is the percentage of a super fund option’s ASX 300 equities investments that we know to be invested in companies that need to demonstrate alignment with the Paris climate goals.

‘Out of line’ is the percentage of a super fund option’s ASX 300 equities investments that we know to be invested in companies that are actively undermining the climate goals of the Paris Agreement.

‘Not disclosed’ is the percentage of a super fund option’s ASX 300 equities investments that is not disclosed to members.

Company classifications are determined as per the methodology for the Out of Line, Out of Line study.

*ASX 300 equities = shares in companies listed in the top 300 (by market capitalisation) on the Australian Securities Exchange

Exposure calculations

This analysis considers only the disclosed ASX 300 shareholdings of a fund’s option, as well as the undisclosed portion of Australian shareholdings. More specifically:
  • The ‘undisclosed’ portion (%) represents the relative value of an option’s Australian shareholdings which are not disclosed.
  • The portions (%) assigned to all other categories (‘fine’, ‘borderline’ and ‘out of line’) represent the (estimated or actual, see below) relative value of an option’s disclosed ASX300 shareholdings. ASX300 shareholdings are defined as those companies listed in ASX300list.com’s 1 January 2019 ASX300 list.
  • Where the value of an ASX300 shareholding as a proportion of the option’s overall Australian shareholdings was undisclosed or otherwise unable to be derived or obtained, the holding’s ASX300 weight (%) as at 1 January 2019 was assigned. In other words, under these circumstances the value was estimated.
  • Where (1) the value of an option’s disclosed ASX300 shareholdings relative to all Australian shareholdings (%) was less than (2) the value of disclosed Australian shareholdings relative to all Australian shareholdings (%) , the former (1) was proportionately increased so as to equal the latter (2).

Example

Option A disclosed 90% of Australian shareholdings with corresponding weights for each holding (% of Australian shareholdings). Option A’s disclosed ASX300 shareholdings represent 80% of its Australian share value and 30% are ‘fine’, 40% are ‘borderline’ and 10% are ‘out of line’. The option’s shareholdings would be displayed as follows:

  • Undisclosed: 10%
  • Fine: 30% / (80/90) = 33.75%
  • Borderline: 40% / (80/90) = 45%
  • Out of line: 10% / (80/90) = 11.25%
  • Total: 100%

Exclusions

Methodology:

  • None = No explicit fossil fuel exclusions
  • Minimal = Explicitly excludes investments in companies involved in some coal, oil or gas, but allows investments in the majority of fossil fuel companies
  • Some = Explicitly excludes investments in companies with material exposure to most coal, oil and gas activities, or manages all equities to a low carbon benchmark
  • Comprehensive = Explicitly excludes investments in all companies with exposure to any coal, oil and gas activities

Calling for Paris-alignment

Funds must demonstrate that they are calling on specific companies to align their business strategies with the climate goals set out in the Paris Agreement. These calls must be made publicly, along with consequences for a company’s failure to comply. One obvious way to do this is to vote in favour of shareholder resolutions calling on companies to align with the Paris climate goals.

At Whitehaven Coal’s October 2018 Annual General Meeting, the vast majority of Australian super funds had the opportunity to vote on a resolution expressing an opinion that Whitehaven should align its strategy with the Paris climate goals. The funds we know voted for that resolution have been marked as ‘YES’ on this metric, while those we know do not hold Whitehaven have been marked as N/A.

Funds will be given further opportunities to vote in favour of strategy alignment resolutions throughout 2019.

Climate Voting Record

The percentage of disclosed votes on climate-related shareholder resolutions that were cast in favour of positive climate action. Taken from Market Forces’ April 2017 study Voting Against Climate Action, which included Australia’s 50 largest superannuation funds.

Scenario Analysis

Scenario analysis is an important tool for funds to measure their exposure to climate change risk under different climate action scenarios, including ones in which the goals of the Paris Agreement are met. Funds should conduct and disclose detailed scenario analysis, providing quantified estimates of value at risk to their portfolios under different climate change scenarios, including one in which warming is held to 1.5°C.

Methodology:

  • None = No publicly disclosed climate change scenario analysis
  • Limited = Disclosure that provides some description of the exposure to climate risk a fund faces under different scenarios, but without quantitative information that allows the public to assess the extent of risk faced
  • Partial = Disclosure of scenario analysis that considers a range of scenarios (including a 1.5°C scenario), provides quantitative data, but does not cover all fund holdings
  • Detailed = disclosure of scenario analysis that considers a range of scenarios (including a 1.5°C scenario), provides quantitative data, and covers the fund’s holdings comprehensively

DISCLAIMER

The information provided by Market Forces does not constitute financial advice. The information is presented in order to inform people motivated by environmental concerns and take actions based on those concerns. Market Forces is organising data for environmental ends.

The information and actions provided by Market Forces do not account for any individual’s personal objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice.

Market Forces recommends all users obtain their own independent professional advice before making any decision relating to their particular requirements or circumstances. Switching super funds may have unintended financial consequences.

For more information about Market Forces, please visit the about page of the site. To see how we profile super funds go to the methodology page.