NGS Super Pledges Carbon Neutral Investment Portfolio

Australian industry superannuation fund NGS Super announced yesterday it has set a target of 2030 to create a carbon neutral investment portfolio.

Established in 1988, NGS Super is a fund for Australian workers in non-government education and community organisations. Boasting around 120,000 members, NGS Super is managing approximately $12 billion of members’ cash.

“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,” said Chief Investment Officer Ben Squires.

This isn’t just about “saving the planet” per se (although you need a healthy planet for a healthy economy long-term), but another step in integrating responsible investment for better returns for the fund’s members.

The fund had already taken some steps towards this, such as shunning investments in companies generating more than 30% of their revenue from the distribution, power generation, or extraction of thermal coal.

Engaging Before Divesting

NGS says it prefers to engage first before dropping investments, believing this results in better outcomes all round. But it says if a company or asset doesn’t have a solid strategy or business plan to transition to the low carbon economy, it will plan to ditch these investments over time.

The Devils In The Detail

As always, there is some fine print in this commitment.

Carbon offsets may ultimately be used to reach the target – which isn’t necessarily a bad thing, but it just depends on the nature of those offsets.

Under the commitment, carbon neutral is defined in terms of carbon dioxide (CO2), not carbon dioxide equivalent (CO2e). Carbon dioxide isn’t the only greenhouse gas. Methane, as in natural gas, has a Global Warming Potential (GWP) of 28–36 over 100 years, while the GWP of carbon dioxide is 1. It’s not clear if NGS has any gas-related investments.

Also, NGS is to merge with Australian Catholic Super (ACS), which has around $9 billion under management on behalf of 86,000 members. NGS says:

“we can’t anticipate or predict the strategic direction of the new merged fund.”

ACS makes some noises about ESG (environmental, social and governance) and responsible investing, but on the issue of climate change and fossil fuels it appears to be a leaner rather than a lifter. However, NGS notes the two are working together to ensure that the new entity “combines the best that both funds have to offer”, including investment strategies.

Super Funds As A Carbon Reduction Superpower

Australia’s $3 trillion superannuation industry has significant financial clout that can be used to help accelerate a transition to a low carbon economy powered by renewables such as wind and solar energy, and NGS isn’t alone in tweaking to the risk to members of taking a business-as-usual approach.

The Net Zero Momentum Tracker – Superannuation Sector report from September last year noted a growing number of major super funds in Australia have set targets or have expressed an aspiration to achieve net zero emissions in their investment portfolios by 2050.

Hopefully moves by funds such as NGS will encourage others to be more ambitious.