Climate change

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Climate change is an important concern of Rest's members. Rest understands that it presents a financial risk that could lead to serious economic and social consequences. We also see the opportunities for Rest to contribute to the transition to a more sustainable, low carbon global economy.

Rest has a long-term objective to achieve a net zero carbon footprint for the fund by 2050. Our sustainability strategy is aligned to five United Nations Sustainable Development Goals (SDGs) including goal 7 affordable and clean energy and goal 13 climate action.

For more information, please read our Sustainability, Responsible Investment and Climate Change Supplement to our 2020/21 Annual Report.

Rest's objective to achieve a net zero carbon footprint by 2050

Rest has a long-term objective to achieve a net zero carbon footprint for the fund by 2050. This is consistent with the goals of the United Nations Paris Agreement. The Paris Agreement seeks to keep global temperature rise this century to well below two degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. Rest’s net zero by 2050 objective is an important next step in our approach to managing environmental social and governance (ESG) factors in our investment process, and consistent with long term investment performance and member expectations.

To achieve this objective, we have set six key measures:

By 31 December 2021, we intend to divest from all listed companies that derive more than 10 per cent of their revenue from thermal coal mining – unless the company has a credible net zero by 2050 plan or science-based targets.

We will advocate for an economy-wide reduction of emissions of 45 per cent by 2030, based on 2005 levels, particularly in order to continue reducing the Weighted Average Carbon Intensity of the equities portfolio year on year.

We have an ambition to increase our investment in renewable energy and low-carbon assets to $2 billion by 2025.

We are aiming to have our directly owned property assets achieve net zero carbon emissions in operation by 2030.

By 2026, we have an ambition to allocate one per cent of the portfolio to ‘impact investments’ that generate strong returns and also provide benefits to society and the environment.

We will regularly conduct analysis and stress testing of our portfolio against a number of different climate change scenarios, including for a society where there are net zero carbon emissions by 2050.

Net zero roadmap

How Rest is responding to climate change

Rest established a Climate Change Policy in 2018 which is reviewed annually. This Policy guides how we respond to climate change and manage the associated financial risks and opportunities. We have also built out our climate change position statement to include seven Climate Change Principles.

Climate Change Principles (PDF)

Understanding the climate-related risks

We’re working with our investment managers on climate-related risks and opportunities as part of our ESG approach. This allows us to understand where the greatest climate-related risks and opportunities are across the fund.

Continuous improvement in our approach

Continue to develop our approach, response, plans and disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). This will support how we manage climate-related risks and opportunities. It also helps with our objective to achieve a net zero carbon footprint for the fund by 2050.

Climate change scenario analysis

Our climate change transition risk scenario analysis was a key step to how we manage climate-related financial risk. This analysis is important because in different transition scenarios, extensive policy, legal, technology and market changes may be needed to address the impact of climate change. Understanding these potential changes helps to inform our investment strategy. Continuing this work will mean our investment decision making process is guided by industry leading climate-related transition risk analysis.

Collaborative engagement for climate action

Responding to climate change requires government commitment and action, with the support of investors, industries and a range of stakeholders across the globe. This means collective action is needed as no one organisation can do this alone.

We advocate for action on climate change as members of industry organisations.

We are members of the Australian Council of Superannuation Investors (ACSI). ACSI has worked extensively for over a decade, and on behalf of members, to engage Australian companies on climate change risks and opportunities, and Rest can join these collective engagements to better understand the company’s approach.

We are also members of the Investor Group on Climate Change (IGCC). The IGCC focuses on managing the impact that climate change has on the financial value of investments. It supports investor collaboration and shares best practice across the industry.

We use active ownership methods by engaging with companies, either individually or collectively. We actively consider all climate change related shareholder resolutions of investee companies.

Rather than divest, we advocate for investee organisations to report in line with the TCFD. This is important because more information on climate-related financial risk improves investment decision making. TCFD disclosures help us understand how companies are managing the risks and opportunities of climate change, including how they manage their greenhouse gas emissions, and set reduction targets.

We continue to engage with investee companies and industry associations to promote business plans and government policies to be effective and reflect the climate goals of the Paris Agreement.

Investing in renewable energy

The Rest Infrastructure Portfolio has $927 million invested in renewable energy infrastructure assets and low-carbon solution assets¹. Our investments in wind farms are in members’ financial interest and also support the transition to a lower carbon economy:

We fully own Collgar Wind Farm, a renewable power project at Merredin in Western Australia’s (WA) central wheatbelt. Collgar Wind Farm fact sheet (PDF).
Rest has a stake in Capistrano Wind Partners, which owns and operates wind farms in North America.

Sharing our progress on climate change

The measurement and disclosure of climate-related risks by financial organisations is a relatively new and evolving field. Rest is committed to measure, monitor and disclose in line with the recommendations of the TFCD, and we encourage investees entities to do the same. These market efforts help investors understand their financial exposure to climate-related risks and opportunities in a clear, consistent and comparable manner.

How do you measure the carbon intensity of share portfolios?

The Weighted Average Carbon Intensity (WACI) is a key metric, recommended by the TCFD, for asset owners to disclose in the reporting of equity portfolio carbon emissions. The WACI measures a portfolio’s exposure to carbon intensive companies. It involves calculating how many tonnes of carbon emissions a company generates per million dollars in sales².

Rest weighted average carbon intensity¹

The Rest weighted average carbon intensity (WACI) for Australian Share and International Share portfolios for the last three years has been declining. We are pleased to share this measure of our progress. We will continue to measure, monitor and report outcomes to our members and other stakeholders on our climate- related progress and actions, and in line with the recommendations of the TCFD.