UniSuper’s new climate risk report suggests the fund has continued quietly selling down its investments in Australia’s largest gas producer, Woodside, and to a lesser extent, fellow climate-wrecking oil and gas expander, Santos.
Despite mergers and share price changes that would have seen UniSuper’s exposure to these companies increase substantially over the past year had the fund simply held onto its shares, UniSuper’s exposure to Woodside has only marginally increased, while Santos has remained flat.
UniSuper says it will consider “divestment—especially where a lack of action is of concern to us and there is no viable decarbonisation pathway.” While the fund has failed to admit this publicly, we can follow the money to determine it sees no viable decarbonisation pathway for Woodside, and may be starting to think the same of Santos.
While this divestment progress is some further reward for the efforts of the more than 15,000 members who have been calling on UniSuper to stop investing in companies expanding fossil fuels, it is still far too slow and far too quiet. UniSuper must publicly commit to divesting from all companies that are undermining global climate goals by expanding the fossil fuel industry.
Giving up on engagement, but failing to fully divest
As recently as last month, in response to members’ demands to fully divest from Santos and all other companies pursuing new and expanded coal, oil and gas projects, UniSuper said “We actively engage with companies to improve Environment Social and Governance practice and reporting. We believe engagement is better than divestment.”
Yet in releasing this latest climate report, Chief Investment Officer John Pearce claimed “we don’t have enough stock to engage with Santos. They don’t talk to us because we’re not a big enough shareholder.”
If UniSuper can’t engage with Santos, and won’t divest its remaining holdings, how can the fund live up to its claim of alignment with the Paris Agreement and manage climate risk while Santos is actively undermining the Paris climate goals by pouring billions into new oil and gas projects?
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Room to more than double fossil fuel exposure
The most concerning aspect of UniSuper’s latest climate report is a newly-announced fossil fuel exposure limit that would actually allow the fund to increase investment exposure to the sector to two and a half times its current level.
The fund has implemented a (look-through*) fossil fuel exposure cap of 7%, with a cap of 5% triggering the fund to start monitoring exposure, despite the fact that its current look-through exposure is 2.80%. UniSuper originally promised to announce a cap in 2021, when its look-through fossil fuel exposure was 2.55%. This woefully inadequate ‘cap’ was definitely not worth the wait.
For UniSuper to give itself leeway to massively increase fossil fuel investments is inexplicable, given the fund’s continued sell-down of companies like Woodside and Santos, and public statement last year that the fund was “unlikely” to actively make new investments in oil and gas.
Doubling down on dubious Paris-alignment claims
UniSuper has also doubled down on dubious claims of alignment with the Paris Agreement’s climate goals, despite such claims currently being subject to a legal challenge by a member.
The fund claims its Climate Risk Report “includes… the strategies we employ that align us with the Paris Agreement”. However, the fund continues to have members’ money invested in companies actively undermining the Paris climate goals by expanding the scale of the fossil fuel sector.
In fact, the report demonstrates a concerning lack of methodical and rigorous analysis of portfolio companies’ (mis)alignment with global climate goals. UniSuper claims “44 of our 50 largest Australian investments have set Paris-aligned net-zero 2050 targets”. This means UniSuper believes a net-zero by 2050 target is all that is required for a company to be Paris-aligned. For a net-zero target to be Paris-aligned, it would need to cover all value chain emissions, and be supported by short- and medium-term targets and plans to demonstrate the company’s overall emissions trajectory is consistent with the Paris Agreement’s climate goals.
Similarly, UniSuper claims “Around 80% of our fund has net-zero or science-based targets—up from 66% in 2021…”. This misleadingly equates companies with genuine science-based targets – that are independently verified and account for relevant value chain emissions – with the likes of Woodside and Santos, whose targets do not apply to the roughly 90% of their emissions generated when their oil and gas is transported and burned.
*Look-through exposure is calculated by adjusting total investment exposure to a company according to the percentage of revenue that company generates from fossil fuels. For example $100 invested in BHP multiplied by 10% [0.1] of BHP revenue generated from fossil fuels = $10 look-through exposure.