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H. E. S. T. Australia Ltd

Initial target disclosure: November 2021

Portfolio level

Portfolio level – Portfolio decarbonisation reference target

Baseline: 30 June 2020

Target Year(s): 2030, 2050

Target(s): 2030: 50% reduction in tCO2e/AU$M invested

2050: Net zero carbon emissions

Baseline performance: 53 tCO2e/AU$M invested

GHG scopes included: Scope 1 and 2 measured and included in the portfolio emissions across all asset classes. We seek to collect scope 3 data, but complete data is not available. We will look to improve data capture and reporting over time.

Asset classes in scope: Listed Equities, Global Debt, Alternative Credit, Infrastructure, Property, Private Equity

Methodology: HESTA has set portfolio carbon reduction targets as it represents HESTA’s share (based on Enterprise Value) of real-world emissions.

HESTA’s target aligns with the aim of the Paris Agreement to limit global warming to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C, which requires economic transition to ’net zero emissions by 2050’.

Portfolio level – Investment in climate solutions target

Quantitative target

Baseline date: 31 December 2021

Baseline performance: 7.7% of portfolio

Target year: 2030

Target: 10% of portfolio

Methodology: We measure progress towards our 2030 climate solutions target through annual measurement of investments aligned to SDG 7, 11.1 and 13, such as renewable energy and sustainable property, according to the Sustainable Development Investment Asset Owner Platform (SDI AOP) Taxonomy.

Asset level

Asset level – Portfolio coverage target

Approach: HESTA plans to undertake a baselining assessment of asset alignment according to the Framework and set targets in due course.

Asset level – Engagement threshold target

Approach: Work currently in progress. HESTA conducts company engagement through direct engagement, collaborative engagement and through service providers. Approximately half of HESTA’s total scope 1 and 2 financed emissions (12 companies) are subject to direct engagement. Remaining material emitters are engaged either through collaborative engagement or service providers. Furthermore, all ASX300 companies held in the portfolio receive an annual letter ahead of voting season asking to set and deliver a verified climate strategy, with Paris aligned targets.

In July 2022, HESTA conducted its annual assessment of the climate change transition progress of companies that are key contributors to portfolio emissions. The assessment identified AGL, Origin, Santos and Woodside faced significant decarbonisation challenges, requiring a major shift in their strategies to offer low carbon energy products. These companies have now been moved to a watchlist position according to HESTA’s engagement escalation framework.

Additional information

Methodology: HESTA’s Climate Change Report, embodying the Climate Change Transition Plan, describes the inclusion of climate considerations in investment integration and active ownership. Our targets, alongside our actions defined by clean engagement pathways and escalation, focused industry advocacy and supporting the health and community services sector through the transition are consistent with delivering the requirement in the IPCC special report on global working of 1.5°C.

Scenario(s) used: HESTA has set portfolio carbon reduction targets to manage key financial and reputational risks. Our target aligns with the aim of the Paris Agreement to limit global warming to well below 2°C, which requires economic transition to ‘net zero emissions by 2050’. We intend to use the Paris Aligned Investment Initiative Net Zero Investment Framework and assess alignment of our approach to a 1.5°C pathway.

Fossil fuel policy: HESTA has a portfolio-wide exclusion, effective of 30 Sep 2022, on:

  • Any listed company that derives 15% or more revenue from the mining of thermal coal.
  • Any unlisted company that derives 15% or more revenue from mining or transportation of thermal coal.

Any company that derives both:

  • 75% or more revenue from the extraction, production and refining of unconventional oil and gas; and
  • 75% or more of its reserves from unconventional oil and gas.

Unconventional oil and gas includes tar sands, shale oil and gas and coal seam gas.

Operational emissions: HESTA’s operations are carbon neutral.

Further information can be found here.

H. E. S. T. Australia Ltd case studies

HESTA: Climate analysis of investment managers

23 March 2023

Commitment 7: Engaging with industry, including asset managers and data providers

HESTA: Implementing an escalation framework

23 March 2023

Commitment 6: Implementing a stewardship and engagement strategy, with voting policy