Rest chief investment officer Andrew Lill is prioritising renewable energy assets as part of the $70 billion super fund’s alignment to Sustainable Development Goals.
The fund plans to invest $2 billion in renewables and lower carbon assets by 2025, achieve net-zero emissions from property holdings by 2030, and allocate 1 per cent of funds to impact investments across markets over the next five years.
Lill says the fund has adopted a multi-asset approach to “operate and scale” select sustainable investments.
“We invest in listed equity companies that are renewable energy companies,” he tells Investment Magazine.
“We’ve also got access to green bonds that are raising financing for renewable energy. We have had in our portfolio exposure to the biggest wind farm in WA, called Collgar, since 2010.
“At the same time, we want to make sure that we’re geographically diverse, and also exposed to both the development and operating stages of wind farms.”
The fund last week announced it had participated in a $250 million capital raising for renewable energy specialist Octopus Australia’s fund, OASIS. It did not disclose its individual contribution, but joins Hostplus, the Clean Energy Finance Corporation, and Sky Renewables UK as investors in OASIS.
“We’ve been aware that Octopus has developed some very strong working relationships with asset owners [and] pension funds in the UK,” Lill says. “We’ve talked to a lot of [them] and asked about their experiences of working with Octopus, and [they have explained that it has] been a very positive experience. We feel confident about being a strategic partner with them.”
He says the partnership offered an additional ESG benefit given Octopus’ commitment to working with First Nations communities in the Northern Territory.
Lill says the renewable energy market is maturing as an investible proposition, with fees becoming commensurate with those on offer for managers of infrastructure assets such as toll roads or airports.
“We get strong financial returns from renewables investments, then we look at the net benefits, the net returns, and put that into a general sort of formula,” he says.
Young members on-board
He recognises that investments in renewable energy not only offer financial returns, but also contribute to the reduction of greenhouse gas emissions and the portfolio’s carbon footprint.
“As a super fund, we have a commitment to five social development goals. There are 17, and we’ve chosen five; two of them – seven and 13 – are linked to climate. Part of that is because we’ve got young members who are very active and how they encourage us to think about financial returns and contributing to climate solutions. We’ve got two million members, and half of them are under 30.”
Rest surveyed its members in 2019 to gauge their thoughts on responsible investment.
Eighty per cent believed super funds should invest responsibly. Additionally, most members (84 per cent) wanted Rest to prioritise responsible industries with good investment performance without sacrificing returns.
By the end of 2021, Rest excluded companies with more than 10 per cent of revenue from thermal coal mining unless they had credible net-zero goals. They also advocated for a ‘Just Transition’ and aimed for a 45 per cent emissions reduction by 2030.