HESTA's Oil and Gas Investments Breach Laws

Published on: 20 August 2022
by KnowESG
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The Environmental Defenders Office (EDO), an environmental law centre in Australia, has accused superannuation fund HESTA of "greenwashing" and putting its participants in danger due to investments in two large oil and gas firms.

The EDO wrote to HESTA, expressing concern that the pension fund's investments in Woodside Energy and Santos, which are major contributors to global warming, represent a financial risk to its members. 

According to the letter, the trustees and directors of HESTA may be in breach of their obligations under the Superannuation Industry Act 1993 due to how they are handling the fund's climate risks.

According to the EDO letter, HESTA's advertising and net-zero investment portfolio claims are greenwashing. The letter outlines several promises made by HESTA on its website about its commitment to sustainable investing. 

HESTA stated in 2020 that it was the first large Australian superannuation fund to commit to decreasing its investment portfolio's absolute carbon emissions by one-third within ten years and becoming "net zero" by 2050.

According to the EDO's letter, the pension fund has more than A$2 billion invested in companies expanding fossil fuels as of the end of 2021, including A$228 million in Woodside and A$190 million in Santos. According to the letter, both corporations are pursuing new fossil gas projects in Australia, and the EDO has separate legal procedures against them regarding the projects.

“As the world de-carbonizes, there is a real and foreseeable, and potentially substantial, risk that investment in gas projects is an investment in ‘stranded capital," the letter says.

It cites the International Energy Agency’s definition of stranded capital as investment in fossil fuel infrastructure that is not recovered over the operating lifetime of the asset due to reduced demand or prices resulting from climate policies.

“Continuous investment in Woodside and Santos is an investment in stranded assets that could lead to negative member financial returns,” the letter said.

According to the EDO, neither Santos nor Woodside's "net zero pathway" includes a reduction in scope 3 emissions under the Paris Agreement. Furthermore, HESTA has failed to adequately interrogate the net zero claims/emissions reduction representations made by companies in which member funds are invested, according to the letter, which also mentions that HESTA recently voted against shareholder proposals requesting Woodside and Santos disclose plans for how aligning capital allocation to oil and gas assets will help them achieve net-zero emissions by 2050.

Source: Chief Investment Officer

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