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Our position on
climate change

Climate change is one of the world’s biggest challenges, and one we take very seriously. It’s why we've committed to transition our investment portfolio to net zero emissions by 2050. We’ve made this commitment to ensure our investment portfolio will be well-positioned as the world adapts to a lower-carbon future.

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Working

towards a more
sustainable world

We know we’ve still got a lot to do, but these are some of the ways we’re helping create a more positive future.

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1. Our investment philosophy incorporates the financial risk of climate change

Climate change is part of our investment philosophy, which means we stress test, review and assess our processes and asset allocation with climate change in mind. 

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2. Using shareholder influence to drive positive change

Where we can, and in accordance with our Responsible Investment Policy, we engage with investment companies to positively influence their decisions about environmental and socially responsible issues. Read our Responsible Investment Policy to find our more.

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3. We invest in support of a clean energy future

We have invested in projects that involve renewable energy, energy storage and other clean energy technology such as green hydrogen electrolysers.  

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4. We offer socially responsible investment options

All of our investment choices are guided by our responsible investment policy. But we recognise that some members want their superannuation to align with their personal values regarding investment in fossil fuels, the environment and other issues. It’s why we developed three Socially Responsible Investment (SRI) investment options:

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5. We’re committed to net zero

We've committed to transitioning to a net zero emissions target by 2050, as part of our approach to climate-related risk management. 

Our approach

to climate change 

These are some frequently asked questions about how Hostplus is managing climate change. 

Net zero emissions means offsetting greenhouse gas emissions that are released into the atmosphere through human activity - that is, removing an equivalent volume of gases from the atmosphere through measures such as planting trees and carbon capture and storage technologies. For Hostplus’ investment portfolio to reach net zero emissions, our investee companies will need to minimise or eliminate emissions attributable to both their business operations and their supply chains.  

Hostplus already manages climate-related risks in our investment strategy and decision-making. We do this through the strategic asset allocation process, climate change stress testing and scenario analysis. We also assess our external investment managers’ climate change risk management capabilities and engage with investee companies about their climate change risk management and disclosure. We have already invested in climate solutions, such as renewable energy projects, and this approach will remain.

We believe that not taking climate action will impact on investment performance in the longer term. This is due to both the physical impacts of climate change and the costs of a disorderly transition to a low-carbon future. If global warming cannot be controlled, damage to infrastructure, other physical impacts from warmer temperatures, more severe weather events and rising sea levels are expected to have a negative economic impact. 

There are a number of actions that Hostplus will be taking to reduce portfolio emissions. These will include: 

  • increasing our investment in clean energy and climate solution technologies 
  • engaging with investee companies to set expectations around emissions reduction and improved emissions disclosure
  • joining collaborative initiatives alongside other asset owners to increase company engagement impact.

Our investment strategy is to retain exposure to a broad range of sectors and seek to create change within companies through engagement, rather than divest from a company or sector and lose influence. We believe the transition to a net zero emissions future needs to be orderly, and investee companies should be provided with the opportunity to adapt.

However, if we believe climate action is lagging and engagement activities are not having the desired impact, we may consider divesting from particular assets or sectors.  

Our primary duty is to optimise retirement outcomes for our members.

We know that climate-related risk presents itself in many ways, including physical risk (such as damage to assets and property, particularly from more severe weather events), transitional risk (which could include risks associated with financial and regulatory adjustments as a result of climate mitigation policies), and litigation risk.

These risks can impact the performance of our investment portfolios, including through changes to asset values or revenue, and costs arising from regulatory changes as the world transitions to a low-carbon economy.

We take climate change and its associated risks very seriously and have implemented systems, policies and processes to ensure that consideration of climate-related financial risks is embedded in our operational and reporting frameworks. 

To manage the financial risks of climate change, we incorporate climate change into the investment process through:

Investment philosophy, investment strategy and strategic asset allocation
We incorporate climate-related financial risk into Hostplus’ investment philosophy which forms the basis of investment decision-making.

Along with our investment adviser, we also consider climate-related risks as part of our investment strategy, including the strategic asset allocation, as a structural thematic alongside a range of other risks. Our Board reviews and approves the investment strategy, which guides investment allocation decisions, at least annually.

Risk framework 
We embed climate-related risks within our internal risk framework, recognising that climate change has the potential to impact us and our members by way of financial, physical, transitional, regulatory, member retention and reputational risks.

Our chief investment officer oversees climate-related risk, which, based upon the current risk level, must be considered and assessed at least every six months. The Board is responsible for setting our risk appetite. If a risk is outside of our risk appetite, the Board is responsible for either accepting the risk or requesting additional controls. 

Controls have been put in place to mitigate and manage climate-related risks. These include the incorporation of climate-related risk within our investment philosophy and investment strategy (including the strategic asset allocation process), conduct of climate change stress testing and scenario analysis, assessment of investment manager climate change risk management capabilities, and engagement with investee companies regarding climate change risk assessment, management and disclosure.  

Stress testing of investment options 
In connection with our investment governance framework, we determine the overall investment profile for our investment options based on a range of factors, including climate change stress testing and scenario analysis.

As part of this analysis, we currently consider and report to the Board on two climate change scenarios – the IEA Sustainable Development Scenario (which has a 66% probability of limiting long-term global average temperature rise to 1.8 degrees by 2100) and the IEA Stated Policies Scenario (which represents announced policies and has a 66% probability of limiting temperature rise to 3.2 degrees).

Our stress-testing scenarios and parameters are subject to annual review. These scenarios help us to quantify potential impacts to performance associated with greater transition and physical risk.

Selection and review of investment managers 
Based on advice from our investment adviser and internal investment team, our Board is responsible for the appointment of specialist external investment managers that manage the underlying investments.

Our internal investment team and investment adviser subsequently undertake regular monitoring of investment managers’ progress. Part of the manager selection and review process involves assessing the climate change risk management capabilities of each investment manager, which are reported to the Board annually through an ESG review.  

Monitoring investment portfolio
We continually monitor our investment portfolios and use external providers to advise on the ESG and climate change risks in our portfolio. Through our investment adviser, we monitor the equities portfolio ESG scores, carbon emissions and climate risk. We also use service provider S&P Global to measure the carbon emissions of our equities portfolio.  

Hostplus’ Board has ultimate responsibility for oversight of our investment decisions, including management of the financial risks due to climate change.

The Board follows an investment approach in accordance with our investment governance framework. Management of climate-related financial risk is embedded in the framework, including through the Investment Philosophy, Responsible Investment Policy, Stress Testing Policy and investment strategy process.  

We invest wholly through specialist external investment managers as we believe this model not only provides great value for our members but also gives them access to the skills and expertise of some of the best investment managers in the world. We work closely with our investment consultant, JANA, to select and monitor our external investment managers. While the approach to ESG integration may vary by manager, each manager's ESG capabilities must be in line with that of their asset class peer group at a minimum for inclusion in the portfolio.

We’ve concluded that it’s not in the best financial interests of our members to apply a blanket ban on any exposure to fossil fuels in our fund. However, we’re keenly aware of the impact of fossil fuels in exacerbating global climate change. For that reason, climate change is a key consideration taken into account by us and our investment managers when applying our investment decision frameworks as described above.

Any investment in a particular company, asset or sector that’s heavily exposed to or reliant upon fossil fuels is likely to be assessed as higher risk. This could be due to likely future regulatory changes and market shifts away from the use of fossil fuels, among other factors. We rely upon our rigorous investment process, which includes external investment managers considering climate-related risk as one of a range of factors, to determine decisions about the selection, retention or realisation of our investments across the portfolio.

Where we’re invested in a company within the fossil fuel industry, we use our influence as a shareholder to create change within these companies by encouraging and supporting an orderly transition to a low-carbon economy. 

We pursue an active ownership program and engage with companies through specialist service providers, the Australian Council of Superannuation Investors (ACSI) and Hermes EOS. This involves meeting the company boards and management.

Our engagement focuses on understanding and analysing how companies are strategically responding to climate change and their capacity to transition to a low-carbon environment. By taking a collective engagement approach, we can exert greater influence beyond our own shareholding in an investee company.

When company oversight or practices are insufficient, that prompts us to take further action, which may include voting for climate-related shareholder resolutions. We favour a pragmatic and commercial approach to voting at company AGMs that considers the specific circumstances of each company and proposal on a case-by-case basis.

We aim to vote in all matters where it is practical and in our members’ best financial interests for us to do so. Our voting takes into consideration advice and voting recommendations received from ACSI and our investment managers.  

Beyond incorporating climate change risk into our investment decisions and engaging with companies to encourage them to take action, we also invest in a range of climate solutions.

As one of the largest Australian investors in venture capital, we invest in a range of assets that aim to change the world for the better – in areas including medical therapies, alternative food sources, collaborative tech, robotics and clean energy – while aiming to deliver future investment returns for our members.

Our members are invested in companies and assets that are at the forefront of developing the technology and solutions we will need to transition to a low-carbon economy. For examples, please read our 2021-22 annual report

Our Socially Responsible Investment (SRI) - Balanced option seeks to reduce exposure to fossil fuels. 

For members whose preference is to avoid investments in fossil fuels, our SRI - Balanced option seeks to reduce exposure to companies that own reserves, explore, mine, extract, produce, refine or generate energy from fossil fuels as well as those companies that receive revenue from servicing these sectors through equipment services, pipeline transport or distribution. A zero-materiality threshold is applied, but dedicated renewable energy generators with backup fossil fuel sources (<5%) may remain investible. 

We recognise that the management of climate-related risk is a rapidly evolving area, which requires continual review and advancement. For this reason, we’ve implemented a commitment to review our approach to climate-related risk management on an annual basis and to report the results of the review to the Board through the ESG Review.


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