Two of Australia's largest superannuation funds have partnered to address investors' growing concerns about the long-term viability of the coal sector in Australia.
Cbus and First State Super, working with the Investor Group on Climate Change (IGCC) and EY, prepared a report which outlines how the energy sector is gradually transitioning away from coal and where new investment opportunities are arising. The report notes that in comparison to OECD peers, the emissions intensity of Australian electricity generation is about 90% higher than the average - but this is likely to change.
Part of the reason for this is the global push towards meeting the Paris Agreement's goal of ensuring a global temperature rise this century of no more than 2A,C. On top of this, multiple coal-fired generators have closed in Australia over the past 10 years, raising concerns about diminishing investment returns in the sector.
The report analyses this issue from multiple lenses, including addressing the looming problem of communities dependent on coal-based jobs. It argues that investors have a key role to play in the "revitalisation of regional economies where coal-based jobs are lost, providing the capital to support new industries, which will result in new jobs. But for investors to support regional transformation, there need to be investable opportunities that will deliver both jobs and returns."
Cbus chief executive David Atkin explained: "With a diverse portfolio like Cbus, transitioning to a low carbon economy brings both multiple challenges and opportunities. This requires significant effort and resources to understand and manage the future risks and opportunities climate change poses for investing and managing our members' retirement savings."
"All stakeholders - government, industry, investors and others - must work together through stable policy, innovation and partnerships to deliver a just and orderly transition. This is good for both investment opportunities and necessary to achieve positive outcomes for workers, communities and the climate," Atkin said.
First State Super chief executive Michael Dwyer added: "Our commitment to this study came as part of our broader Climate Change Adaptation Plan, established in 2015. As the stewards of $85 billion in superannuation and retirement savings, it is our responsibility to ensure that our investments responsibly address climate risk and positively contribute to the future of local communities."
"Investors could be the key to the transition of regional economies affected by coal closures, by providing the capital needed to support new industries. But to do this, there needs to be investable opportunities," he said.