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Beyond fossil fuel free

At Australian Ethical, we recognise that climate change is the most complex challenge Australians face today. Here's how we've committed to a better way of investing to address the climate – with an emissions-free future.


15 February 2016

The planet's future is under threat

At the 2015 COP21 in Paris, nations around the world finally recognised the existential risks of climate change and urgent need to reduce emissions.

An ambitious target was set: “well below” two degrees Celsius above pre-industrial levels. There’s just one problem; Pledges to reduce emissions don’t even come close to enabling achievement of that target.

As environmental activist Naomi Klein said, “It’s a very strange thing to cheer for setting a target that you are knowingly failing to meet”.

And what are the consequences of runaway climate change? Extreme heat waves, declining global food stocks, loss of ecosystems and biodiversity, and life-threatening sea level rises are all likely possibilities.

The world needs a clean energy future, now

The urgency of addressing climate change requires rapid adoption of renewable energy.

There is no longer the option of a slow transition, or to transition to clean energy via lower-emissions fossil fuels. The time for clean energy is now.

Investments in clean energy

By investing with Australian Ethical, you’re part of the solution, not part of the problem. Your money is being invested in solar, wind, tidal, geothermal, and hydro renewable energy companies.

Don’t just take our word for it! This year we asked the Paris-based 2° Investing Initiative to undertake an independent check of just how climate friendly our investments really are. They concluded that, “The Australian Ethical portfolio has a higher renewable power exposure than the market average in 2015. [Australian Ethical’s total renewables capacity] builds out roughly in line with the two degrees trajectory, thus outperforming the two degrees benchmark in 2020.”

We also invest heavily in energy efficiency because the efficient use of power is just as important as the supply of clean energy because it serves to eliminate wasted energy; an avoided watt needs no resource to produce it.

Fossil fuel free commitment: no investment in fossil fuel sector companies

Australian Ethical has never invested in coal or oil. We led divestment from the unconventional gas sector in 2011, and in 2015 we made the decision to exit our remaining limited exposure to conventional gas sector companies.

Net-zero: Our commitment goes beyond fossil fuels

While focussing on the fossil-fuel industry as the most emissions-intensive sector is critical to solving the problem, it is not enough. To fully meet the urgent challenge of global warming, the entire economy needs to cut carbon emissions – from the food we eat, to the transport we take, and so on. This is known as known as ‘decarbonising’.

We believe that it is critical for all players in the economy, investors, companies, and consumers to play their part to decarbonise and reduce their exposure to carbon-emitting activities. There’s no time to wait for a political solution. It is only through a critical mass of people who decarbonise that will momentum build, and only then can the barriers of resistance be broken to come to the right end result.

Investment markets have a particularly significant role to play as they exert so much influence on companies and the political sector.

We believe that all investment funds should disclose the emissions intensity of their portfolios. There need to be more investors decarbonising by a date consistent with an acceptable level of warming, based on current science.

Yet, Australian Ethical is the only Australian super fund to have set a net-zero emissions target and timeframe for all our investments. We have signed two pledges consistent with this commitment; the Montreal Pledge and the Portfolio Decarbonisation Coalition.

Consistent with our beliefs, Australian Ethical commits to:
  • disclose the emissions intensity of our portfolio. We’ve already disclosed the emissions intensity of all our shares, and will continue to do so, and;

  • target our portfolio to be net-zero emissions intensive by 2050.

An impact beyond our investments

We believe our impact is not just limited by what we can achieve through the way we invest.

Here are other ways we’re having an impact:

Investor leadership –  We’re speaking to investment groups about the important role the sector can play, taking responsibility and setting direction to address climate change through investment.

Companies – We’re working with companies to help them report transparently about direct and indirect emissions, and set their own emission reduction paths.

Government – By injecting an ethical investor voice into policy debates, we’re working to stimulate urgent government action on climate change.

You can read more about what we’re doing in the Climate Action section of our 2016 Sustainability Report (pp 40-48).

Australian Ethical acknowledges the Traditional Owners of the country on which we work, the Gadigal people of the Eora Nation, and recognise and celebrate their continuing connection to land, waters and culture. We pay our respects to Elders past, present and emerging and thank them for protecting Country since time immemorial.