2030 super target: a carbon neutral investment portfolio16 Mar 2021 3 min read
NGS Super is pleased to announce that we have set a target of 2030 to create a carbon neutral1 investment portfolio.
Climate change is a threat to us all, to the planet we live on, and the futures we look forward to and plan for. The science tells us that we need to take action now — and that’s what we’re doing.
Why carbon neutral investments?
Our Chief Investment Officer Ben Squires said:
“Our target of being carbon neutral by 2030 is the next step in integrating responsible investment for better returns for our members. We believe integrating environmental, social and governance (ESG) and responsible investment principles is vital to managing risk within our investment portfolio and providing our members with better risk-adjusted returns.
“We acknowledge that pursuing a carbon neutral target date of 2030 is ambitious, but we also believe a 2050 target is misaligned with the timeframes the scientific community has given in relation to stemming human-induced climate change.”
Australia’s $3 trillion super industry has a significant role to play in the transition to a low carbon world, and we’re proud to be part of this positive action.
2030 super investment portfolio
Laura Wright, CEO of NGS, said:
“We believe that climate change needs to be acknowledged in investment portfolios, and that taking immediate action is the best way to protect the retirement savings of our members.
“This is a significant announcement, and there is an enormous amount of work going on behind the scenes. We look forward to sharing more details of the process with our members, our employers and the wider community as we make the transition to carbon neutral.”
NGS has been working towards this transition plan for many years — here's our ESG journey to date:
And you can find out more about what we’ll be doing to reach our target below, as well as answers to any questions you may have.
Carbon Neutral 2030: FAQs
Why has NGS Super announced this target?
The transition to a carbon neutral portfolio is the next step in integrating responsible investment for better returns for our members.
We believe that the risks of climate change need to be addressed in investment portfolios, not some time in the distance future, but right now. If we don’t act, these risks pose a threat to the retirement savings of our members.
What does this mean for my super?
What it means is that we are making changes to our investment portfolio to protect your savings from risks associated with transitioning to the low carbon economy. To explain those risks, let’s take the example of an investment in a company we’ll call XYZ. That company’s revenues are 100% derived from mining thermal coal, and it has no plan to diversify. As we move towards a low-carbon economy, demand for XYZ’s products will reduce significantly, also reducing its profitability and share price. That’s not an investment that will provide good returns for you.
We’ll engage with companies like these to encourage a transition to low carbon. Another significant part of achieving our goal will be seeking out companies that are actively reducing their carbon intensity, so your money continues to make strong returns while being invested positively.
How will NGS create a carbon neutral portfolio by 2030?
We’re currently developing a decarbonisation transition plan which will guide our activities over the next decade and provide the specific details of how we will work to achieve our goal.
We hope to finalise this transition plan by the end of 2021, and we will share updates with our members and employers as they are available.
Portfolio decarbonisation is an emerging area. This means that we will need to adapt our approach as we proceed. We acknowledge that the data and methodologies for counting carbon and offsetting are not perfect but, in our view, this is not an excuse to do nothing.
How does NGS measure carbon in the portfolio?
We currently measure the carbon intensity of approximately 50% of the portfolio (equities). In the transition planning phase, we will measure the whole-of-portfolio carbon intensity, then work to reduce this to achieve our carbon neutral goal.
Does NGS currently have fossil fuels in its portfolio?
Since 2016 we have had an exclusion in place for public companies generating more than 30% of their revenue from thermal coal.
We acknowledge that we currently have other forms of carbon within our fixed income and private investments. Our transition to a zero-carbon portfolio is likely to require further exclusions and potentially some divestment.
What’s the difference between engagement and divestment?
Engagement is, to put it simply, talking to the companies we invest in to help improve how they do things. NGS has always preferred to engage rather than divest (i.e. get rid of investments) where we can. We believe that this results in better outcomes for shareholders, the economy, and the world we live in.
Engagement will be key to our transition plan, but where it is clear that a company or asset doesn’t have a sound strategy or business plan to transition to the low carbon economy, we will plan to divest these assets over time.
Will NGS be using carbon offsets?
We’d prefer not to use carbon offsets to achieve our goal. However, we will measure the carbon offsets that occur from our investments in renewable energy and other forms of carbon sequestration we hold in the portfolio. If we decide to use carbon offsets we will share this information in our reporting to members.
What happens when NGS merges with ACS?
The NGS Super trustee has set this target. We can’t anticipate or predict the strategic direction of the new merged fund, but NGS and ACS are working together to ensure that the new entity combines the best that both funds have to offer, including our investment strategies.
1 For the purposes of this transition, carbon neutral is defined in terms of carbon dioxide (CO2). CO2 is the largest contributor to greenhouse gases.