Eco Investor October 2014


HESTA Limits Thermal Coal Investments

Joining the growing list of institutional investors reducing their exposure to coal investments is superannuation fund HESTA, which has begun to progressively restrict its investments in thermal coal across all its investment options.

Under the restriction, HESTA will not make new investments in unlisted companies that derive more than 15 per cent of revenue or net asset value from exploration, new or expanded production, or transportation of thermal coal. It will not invest in any IPO or newly listed companies that derive more than 15 per cent of revenue or net asset value from exploration, or new or expanded production of thermal coal. Nor will it participate in rights issues or share placements by listed companies for these activities.

In addition, a more extensive exclusion applies to HESTA's socially responsible investment option, Eco Pool. This will exclude investments in any listed company that derives more than 15 per cent of revenue or net asset value from the generation of electricity from brown coal or lignite; the exploration, production or transportation of thermal coal; or from contracting or supplying to listed companies captured by this exclusion.

HESTA is working with its investment managers to implement the thermal coal restrictions.

The restriction is not complete, but it is a step in the right direction.

Chief executive officer, Anne-Marie Corboy, said HESTA is the first major Australian superannuation fund to restrict thermal coal investments across all its investment options, saying that while some other funds have a restriction on thermal coal investments, it is typically limited to their socially responsible investment options.

"‘Unburnable carbon' is likely to become an increasing risk in the medium to long term, especially for companies heavily invested in thermal coal, or those seeking to develop new long-term assets," said Ms Corboy. "HESTA is of the view that new or expanded thermal coal assets face the highest risk of becoming stranded before the end of their useful life. "It is not prudent, nor in the long-term interest of members, to invest in the expansion of these assets."

Ms Corboy said the restriction is another step in the Fund's ongoing response to the increasing impact of climate change on its long-term investments. "The push to limit the impact of global warming requires economies to move to a lower-carbon intensive future and investors have an important role to play in this transition," she said.

HESTA has more than $29 billion in assets and 785,000 members.





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