One of the first responses received by a Vital Few member was from Australian Ethical. We think Australian Ethical’s response is pretty good and the level of transparency they offer their members (such as a full list of holdings) is very impressive – something we hope to see other funds doing as well. We thank the Vital Few member who kindly granted us permission to publish their fund’s response. Check out the full response…
Sent: Tuesday, 20 November 2012
Subject: Are you the vital few?
To whom it may concern,
It has come to our attention that Australian Ethical may be jeopardising XXXXXXXXXX’s future, both financially and environmentally by not incorporating climate risk into their investment process. XXXXXXXXXX has crafted this message for you through our website (www.areyouthevitalfew.org).
We encourage you to respond to them directly at XXXXXXXXXX.
The evidence for climate change risk in your portfolio is clear enough to warrant immediate and specific attention. Whatever the current situation, many of the potential risks of the high-carbon economy are already appearing. Whether it be China’s race to dominate renewables, innovation competing with fossil fuels on level terms, regional policies converging, investors re-allocating capital or a dramatic physical climate event creating panic, these can all spark some kind of climate crash and create huge financial problems for Australian Ethical if it is over-invested in high-carbon assets.
I will no longer stand by unknowingly supporting the high-risk, high-carbon economy.
The short-term focus of your investment strategy makes it difficult for you to anticipate this bursting of the carbon ‘bubble’ but I believe you can protect your portfolio from the worst of the impacts. Risks like this are so large that you cannot avoid them. But I have no evidence of how you are dealing with them on our behalf, in a material sense, and so I am now requesting that you:
- Provide me with detailed disclosure about how you manage climate change risk impacts on your portfolio
- Provide me information on how you intend to hedge your bets by investing 5% by 2015 into the low-carbon economy
I also request that you disclose this information to a fully independent body, the Asset Owners Disclosure Project, so I can see how your climate risk investment strategies rate against other sovereign wealth funds. (www.AODProject.Net).
I would like to think that Australian Ethical has my future in mind, and can be a bold leader in tackling the real issues of climate risk as it structures its business for the long term.
From: Members [mailto:firstname.lastname@example.org]
Sent: Friday, 30 November 2012
Subject: RE: Are you the vital few?
Thank you so much for sending through your letter.
“Are you the vital few?” is a powerful campaign being run by the Climate Institute and one that we are obviously very supportive of. It will draw attention to some extremely important issues about how people align their values with their investments, something all our members (just like you) effectively do by investing with Australian Ethical.
I can assure you that Australian Ethical shares your views on climate change. As the most respected ethical or green super fund in Australia, we take a strong stance when it comes to positioning our portfolios to support companies working towards a clean energy future and avoid companies unnecessarily contributing to climate change.
Here are just a few examples of the way we do this:
· Only 4 investments across our entire screened product range are directly exposed to the price on carbon. No other superfund can lay claim to this.
· We invest in renewable energy and energy efficiency solutions – not only do we prioritise investment in clean energy across our portfolios, we even have a specialised International Equities Trust that invests along the theme of global smart energy solutions. For more information on this trust check out the website: www.australianethical.com.au/strategy/international-equities-trust
· We avoid investment in carbon-intensive industries including coal-fired power stations, coal mining and large oil companies, as well as other types of mining that cause environmental harm. Again, check out the companies we do invest in on the link above. We are the only superfund in Australia that excludes these companies from our screened products.
· We actively engage with companies. When we were concerned about Origin’s involvement in the coal seam gas business in Queensland, we engaged with the company and then divested when we weren’t satisfied with the responses we received. You can read more on this at: www.australianethical.com.au/news/australian-ethical-sells-out-origin-energy.
· We were also pioneers in the responsible investment industry in Australia through the launch of the Climate Advocacy Fund, designed to be an activist shareholder and bring about corporate change. Watch this space for exciting new developments with this product!
We believe in full transparency. For a list of all our holdings, and why we’re proud to support them, check out this link: www.australianethical.com.au/who-we-invest-in
Hopefully this response reassures you that we are in fact bold leaders in tackling climate change through our investments.