Australian Ethical is to divest from companies that supply gas, as it believes improvements in renewable energy technology are making low-carbon energy sources unnecessary.
The $1.3 billion fund has never invested in coal or oil, and led the move to divest from coal seam gas in 2011. However, it has long invested in domestic companies such as Duet Group and international giants such as Tokyo Gas and Osaka Gas on the basis that it would help lessen the reliance on higher-carbon emitting coal-fuel power stations.
The fund now believes that improvements in renewable energy sources and the technology to store such energy offer the best opportunity to replace a reliance on coal.
The fund, which is largely made up of default superannuation along with personal investors, has made a series of decisions over the past few years to move toward a fully decarbonised portfolio.
David Macri, chief investment officer at Australian Ethical, spoke of a tipping point being reached.
“The amount of time, energy and resources needed to make the transition from coal to gas might as well be spent on making the transition from coal to renewables, as the technology has progressed rapidly and we expect it to progress on an exponential curve,” he said.
He sees the signing in Paris of a new climate change agreement among the world’s largest economies as giving further weight to the decision to divest, which it made a month ago.
“This will definitely be a catalyst for capital markets to start finding investments in good clean technology,” he said.
And he warned that other institutional funds should be giving serious thought to how they would manage the coal, oil and gas exposure in their portfolios.
The Paris agreement’s target of limiting a rise in temperature as a result of climate change to 1.5 degrees will mean investors will have to reassess the carbon risk in their portfolio, he says.
“A 1.5 degree scenario is a dramatic change to the energy supply of the world. It will be a fundamental change in how you measure risk.”
