Super returns better off with Paris Agreement goals

Scenario analysis has demonstrated that Rest’s members will be better off by achieving Paris Agreement goals, with the estimated annualized investment returns for its default core strategy investment option expected to be nearly two percentage points higher by 2040.

The analysis showed that assuming the average 48-year-old Rest member had an account balance of $67,000, with the average salary for workers of this age in the retail industry or around $48,000 per year, could be approximately $50,000 better off when they retire at age 67 in 2040 if the world acts to keep temperature rises below two degrees Celsius.

Andrew Lill, Rest chief investment officer, said that setting the roadmap to achieve to achieve a net zero carbon footprint for the fund by 2050, consistent with the goals of the Paris Agreement, would mean many of its members working in part-time, casual and lower-income jobs would benefit from actions that mitigate risks and help open up investment opportunities as the world would be transitioning to a lower-carbon economy.

Rest had six measures to achieve a net zero carbon footprint by 2050:

• By 31 December, 2021, divest from all listed companies that derived more than 10% of their revenue from thermal coal mining – unless the company had a credible net zero by 2050 plan or science-based targets. It advocated for a “just transition” for those communities that would need support as we move to a lower-carbon economy;
• An economy-wide reduction of emissions of 45% by 2030, based on 2005 levels, particularly in order to continue reducing the weighted average carbon intensity of the equities portfolio year on year;
• Increased investment in renewable energy and low-carbon assets to $2 billion by 2025;
• Have its directly owned property assets achieve net zero carbon emissions in operation by 2030;
• By 2026, allocate 1% of the portfolio to impact investments that generated strong returns and also provided benefits to society and the environment; and
• Regularly conduct analysis and stress testing of its portfolio against a number of different climate change scenarios, including for a society where there were net zero carbon emissions by 2050.

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Rest also said it had made an $80 million commitment to the Copenhagen Infrastructure Partners’ (CIP) Energy Transition Fund which would provide the potential opportunity to invest in a significant renewable project being developed in Australia.

In November last year, Rest confirmed its commitment to achieving a net zero carbon footprint for the fund by 2050, after settling litigation brought by a member on its fiduciary responsibility to act on climate change.

“This was an important next step in our approach to managing environmental social and governance (ESG) factors in our investment process,”Lill said.

“Our members’ retirement savings will also be contributing to a more sustainable future. More of their money will be invested in assets that will contribute to a more sustainable future, and less will be invested in assets that are fuelling climate change, like thermal coal.”