$13bn fund seeks coal haven in reversal of ESG policy

After divesting from Whitehaven in 2021, new research from Market Forces has revealed that Vision Super is once again invested in the thermal coal miner.

According to Brett Morgan, superannuation funds campaigner at Market Forces, the industry fund has changed its environmental, social, and governance policy, removing its ban on companies that generated more than 25 per cent of their revenue from thermal coal mining.

This, according to Morgan, has allowed the fund to quietly reinvest in Whitehaven, a company that Morgan described as “one of Australia’s worst climate wreckers”.

“By scrapping its coal exclusion policy, Vision Super is out of step with member expectations as many super funds are dumping all investments in thermal coal,” said Morgan.

Since Vision Super was among the first to implement a partial exclusion on thermal coal, oil, and gas producers, Morgan is concerned about the precedent this move sets.

“It’s alarming that Vision Super has withdrawn its thermal coal exclusion policy after previously demonstrating climate leadership,” he said.

Responding to a request for comment from Super Review, Vision Super said that it “evolved” its ESG policy on 1 July, so that instead of focusing only on fossil fuels, it now seeks to “reduce carbon emissions across the entire listed equities portfolio”.

Namely, under its new strategy, the fund does not restrict its managers from buying shares in any particular company, instead they are given an overall budget expressed as a reduction in carbon intensity from the relevant benchmark.

“Climate change is one of the greatest environmental and financial risks our investment portfolio faces, which is one of the reasons why we made this change – the risks are not confined to fossil fuel companies,” a spokesperson for the fund said.

This new policy, the fund said, has been successful in reducing its carbon intensity.

“According to our ESG data provider, Institutional Shareholder Services (ISS), in FY2023 under the carbon budget approach, the fund level weighted carbon intensity of our listed equity portfolios was 42 per cent less than the primary benchmark,” the spokesperson said.

“The previous year, under the previous exclusions approach, that number was 17 per cent.”

However, acknowledging that from the financial year 2022–23, many energy companies had a decreased carbon intensity due to higher revenues, Vision Super said according to revised metrics, the reduction is actually in the order of 8 per cent rather than the 25 per cent suggested above.

Concerns extend beyond Vision Super

Market Forces also highlighted recent actions by Whitehaven that it fears could encourage other funds to reinvest in the firm based on their current policies.

Namely, back in April, Whitehaven hailed the purchase of two of BHP’s metallurgical coal mines as an opportunity to transform the company “into a metallurgical coal producer”. In FY23, Whitehaven generated more than 90 per cent of its revenue from thermal coal but now claims this purchase will see that drop to 30 per cent.

Given that several super funds currently have policies in place that exclude investments in companies generating more than a certain percentage of their revenue from the sale of thermal coal, Morgan is worried that Whitehaven’s latest play will see it placed back in funds’ portfolios.

“Whitehaven will try every dirty trick in the book to keep expanding coal production and deserves no financial support from any super fund serious about ensuring a stable climate and retirement for members,” he said.

“Members are crying out for all super funds to dump all coal for good.”

Morgan is particularly concerned about Commonwealth Super Corp (CSC) that has a 70 per cent revenue threshold in its policy. Despite the fund having divested from Whitehaven several years ago, Morgan highlighted CSC as the only fund that could categorically reinvest its members’ retirement savings in the coal miner if it, indeed, starts to generate significantly less revenue from the sale of thermal coal.

Super Review reached out to CSC for comment but was told that CSC does not provide running commentary in response to market reports such as this.

The corporate regulator has recently taken a firmer approach to policing greenwashing behaviour among institutional investors, including super funds.

In March, the Australian Securities and Investments Commission (ASIC) saw its first greenwashing court victory after the Federal Court found Vanguard Investments Australia contravened the law by making misleading claims about certain ESG exclusionary screens applied to investments in a Vanguard index fund.

A few months later, in June, the corporate regulator achieved another win with the Federal Court finding Active Super’s trustee LGSS contravened the law in connection with various misleading representations concerning its ESG credentials.

Among other things, the Federal Court ruled that Active Super invested in various securities that it claimed were eliminated or restricted by ESG investment screens from 1 February 2021 to 30 June 2023.

Moreover, late last year, Mercer Super was handed an $11 million penalty under a proposed settlement with ASIC over allegedly misleading statements to members on the sustainability of its investments.