HESTA, the super fund for health and community services, is to progressively implement a restriction on investments in thermal coal.

It 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.

In addition, it will not invest in any newly listed companies — from listing onwards — that derive more than 15 per cent of revenue or net asset value from exploration, or new or expanded production, of thermal coal. It will also not participate in the provision of direct funding via rights issues or share placements to already listed companies for expenditure on business expansion in any of these activities.

Angela Emslie, chair of HESTA, said the ruling will not impact on investments in Rio Tinto and BHP Billiton. She said both derived less than 15 per cent in revenues in thermal coal.

HESTA is the first major Australian superannuation fund to restrict thermal coal investments across all its investment options claimed Anne-Marie Corboy, the fund’s chief executive. The decision was taken in the belief that government reductions in the burning of carbon is likely to impact investments in fossil fuel reserves.

“This ‘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 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.”

Corboy described the restriction as 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.