Cutting Carbon: What the rush to divest fossil fuels means for emissions reduction and engagement

Over the last year, several major Australian investors committed to significantly decarbonise their portfolios, including by setting net-zero targets for 2050.

ACCR's newest research report—Cutting Carbon: What the rush to divest fossil fuels means for emissions reduction and engagement—considers the decarbonisation of listed equity portfolios in Australia.

The report explores current investor initiatives and commitments to support decarbonisation and energy transition, and discusses the use of carbon exposure metrics to manage transition risk.

It also includes new analysis of the 25 largest emitting companies in the S&P/ASX200 index—how they are disclosing carbon emissions, and what their short-, medium- and long-term emissions reduction targets are.

Key findings

• Some investor initiatives are actively recommending divestment from, at least, distressed sectors of the coal, oil and gas industries;
• Several Australian investors have made commitments that imply immediate or imminent divestment from some fossil fuels;
• Carbon exposure metrics are an imperfect tool to measure climate risk, much less to base targets on;
• Australian superannuation funds' disclosure of carbon exposure metrics is currently limited and inconsistent, preventing meaningful comparison between funds;
• Most of the companies responsible for the majority of the emissions in the benchmark S&P/ASX200 index are yet to commit to substantive emissions reduction targets by 2030.

The report makes three key recommendations:

1. The scope and detail of portfolio decarbonisation must be transparent;
2. Portfolio decarbonisation must include forceful engagement with high-emitting companies;
3. Institutional investors must be prepared to allocate capital to climate solutions, from renewable energy to energy efficiency and emerging technologies.

You can download the report as a PDF, or continue through it's pages online below, starting with the Executive summary.

Media coverage

Coverage of this report since its release has included:

• The Australian, 1 Feb 2021, ‘Stealth’ divestment of stocks not a benefit
• Financial Standard, 1 Feb 2021, Super fund ESG targets lack clarity: ACCR
• SMH, 2 Feb 2021, Super funds must follow through on climate plans
• Investor Daily, 2 Feb 2021, Super divestment falling short on climate action: ACCR
• Business Insider, 2 Feb 2021, 10 things you need to know this morning in Australia
• The New Daily, 2 Feb 2021, Cutting carbon: These corporate giants are the biggest polluters on the ASX