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HESTA Super Fund

PRI reporting framework 2020

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe HESTA has begun an analysis of its real asset holdings (real estate and infrastructure) examining the impact of extreme weather events on the portfolio. The work is ongoing, and is reported to the HESTA Board's Investment Committee and Impact Committee.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

As at 30 June 2019, HESTA had commissioned independent advice on the impact of climate change risks on its portfolio. Post-30 June 2019, we have received the advice, and are considering how it will impact HESTA’s current investment approach. The advice includes considerations on the timescale relevant for each of the risks and opportunities identified by the investment team, with reference to the UN-backed PRI’s Inevitable Policy Response, among others.

SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

As at 30 June 2019, HESTA had commissioned independent advice on the impact of climate change risks on its portfolio. Post-30 June 2019, we have received the advice, which will inform the development of a comprehensive Climate Change Transition Plan for publication during the 2020 calendar year.

The Transition Plan will inform how HESTA approaches the risks and opportunities arising from climate change, in line with our support for the Task Force for Climate-related Financial Disclosures and our alignment with its reporting framework. The advice includes considerations on the timescale relevant for each of the risks and opportunities identified by the investment team, with reference to the UN-backed PRI’s Inevitable Policy Response, among others.

HESTA has further begun an analysis of its real asset portfolio (real estate and infrastructure) examining the impact of extreme weather and climate change events on the portfolio. The work is ongoing, and is reported to the HESTA Board's Investment Committee and Impact Committee. 

Describe

HESTA considers stranded asset risk in its engagement with listed companies and asks companies to ensure their capital expenditure is aligned with the goals laid out in the Paris Agreement. As part of these efforts, HESTA co-filed a shareholder resolution at the 2019 BP AGM. Supported by the company, the resolution proposed a link between executive remuneration and the company's emissions reduction goals. Post 30 June 2019, we are exploring how this approach can be applied to companies listed on the ASX.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Describe

As at 30 June 2019, HESTA had commissioned independent advice on the impact of climate change risks on its portfolio. Post-30 June 2019, we have received the advice, which models the impact of a range of climate change scenarios on the HESTA portfolio through to 2100. We are considering how it will impact HESTA’s current investment approach. The advice includes considerations on the timescale relevant for each of the risks and opportunities identified by the investment team, with reference to the UN-backed PRI’s Inevitable Policy Response, among others.

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify: 

          Mercer E3ME Model.
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

The strategy is an international passive low carbon shares strategy. It aims to achieve a carbon footprint at or below 50% of the Index while delivering index-like return.

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description 

          Encourage our external investment managers to incorporate climate change and carbon emissions risks and opportunities into their investment decision making processes.

14.5. Additional information [Optional]

HESTA has a specific Climate Change Policy which outlines our principles and commitments in relation to the incorporation of climate change considerations into investment processes and decision-making. Given our outsourced investment model, encouraging our external investment managers to incorporate climate change and carbon emissions risk into their investment decision making processes is central to our approach.

We have signed successive annual Global Investor Statements on Climate Change, supporting greater action by policymakers on the issue of climate change.

The information below outlines in more detail the activities undertaken by HESTA to respond to climate change risk and opportunity in our portfolio.

Reduced portfolio exposure to emissions intensive or fossil fuel holdings: In 2015 HESTA introduced a portfolio wide restriction on new investment in companies materially involved in new or expanded thermal coal assets. In our environmentally and socially responsible investment option, Eco Pool, we introduced a further restriction on investment in companies with material involvement in

  • exploration, production or transportation of thermal coal assets;
  • contracting or supplying to listed companies undertaking these activities; or
  • generation of electricity from brown coal or lignite.

Sought climate supportive policy from governments - this is undertaken on our behalf by the Investor Group on Climate Change and to a lesser extent, our engagement service providers, the Australian Council of Superannuation Investors, Regnan - Governance Research & Engagement and Hermes Equity Ownership Services.

SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Weighted average carbon intensity 
          The figure is currently monitored, but will inform investment decisions post 30 June 2019.
        
          CO2 per $ of sales
Carbon footprint (scope 1 and 2) 
          The figure is currently monitored, but will inform investment decisions post 30 June 2019.
        
          CO2
Portfolio carbon footprint 
          The figure is currently monitored, but will inform investment decisions post 30 June 2019.
        
          CO2 per $ invested

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

Climate change is captured under ESG risk within the HESTA Corporate Risk Register. As at 30 June 2019, ESG risk falls within the reputation risk framework of the Corporate Risk Register. 

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

We request our engagement providers Hermes EOS, ACSI and Regan to specifically address TCFD recommendations and their implementation as part of their engagement with companies invested.

SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

4 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

11 Percentage of AUM (+/-5%) per asset class invested in the area
4 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Private equity and infrastructure investment in renewable energy and related infrastructure.

Asset class invested

22 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

A large portion of property portfolio classifies as 'green', being buildings that are in the top 25% of buildings when compared against the market (city) average from NABERS

Asset class invested

1 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Private equity investment in companies that provide financial services to financially excluded people.

 
          Sustainable or low carbon themed investments

Asset class invested

5 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

HESTA has two listed equities mandates where companies are selected on the basis of “Best in Class” ESG criteria. These investments meet the criteria for an environmental and social themed investment but do not fit solely within any of the social or environmental themes provided. The listed companies included in these investments operate across all sectors.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]


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