21 October 2021
Scenario analysis has estimated the impact of climate change on investment returns
Scenario analysis and stress testing of Rest’s investment portfolio has estimated our members will be better off if the global community acts to keep temperature rises to well below two degrees Celsius by 2100.
Scenario analysis of Rest’s default Core Strategy investment option has estimated that annualised investment returns could be nearly two percentage points higher by 2040 if the world acts to achieve the Paris Agreement goals.
The average 48-year-old Rest member has an account balance of $67,000. The average salary for workers of this age in the retail industry is around $48,000 per year.
A member with this account balance and salary 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.i Their account balance at retirement would be around 29 per cent higher.
“Climate change poses a material financial risk to our members’ retirement savings and it’s critical that the global community takes collective action to meet the goals of the Paris Agreement,” said Andrew Lill, Rest’s Chief Investment Officer.
“With $66 billion in funds under management, it’s critical that we play our part. We have set our roadmap to achieve a net zero carbon footprint for the fund by 2050, and it is consistent with the goals of the Paris Agreement.
“Many of our members work in part-time, casual and lower-income jobs. Ultimately, this is about helping them achieve their personal best retirement outcome.
“We believe these actions will mitigate risks and also open up investment opportunities as the world transitions to a lower-carbon economy.
Rest, recently named as a Responsible Investment Leader for 2020 by the Responsible Investment Association Australasia (RIAA), has set six measures on its net zero emissions by 2050 roadmap.
Meanwhile, Rest’s wholly owned Collgar Wind Farm in Western Australia was last week ranked by GRESB as one of the best infrastructure assets in the world for environmental, social and governance (ESG) management and performance.
The wind farm, which generated around one-fifth of WA’s wholesale renewable power in the Financial Year 2021, received a total score of 99 out of 100 from GRESB.
This score gave it a first-placed ranking for Wind Power Generation asset globally and third-placed ranking out of the 558 Infrastructure assets assessed. Collgar Wind Farm was recognised by GRESB for demonstrating outstanding leadership in sustainability, receiving the 2021 Renewable Power Sector Leader designation.
Rest has also made an AU$80 million commitment to Copenhagen Infrastructure Partners’ (CIP) Energy Transition Fund. This relationship with CIP will provide Rest the potential opportunity to invest in a significant renewable project being developed in Australia.
Rest has set six measures to achieve a net zero carbon footprint by 2050
- 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 advocate for a ‘just transition’ for those communities that will need support as we move to a lower-carbon economy.
- 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.
In November last year, Rest confirmed its commitment to achieving a net zero carbon footprint for the fund by 2050.
“This was an important next step in our approach to managing environmental social and governance (ESG) factors in our investment process,” said Mr Lill.
“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.”
More details on the measures and roadmap can be found here.