Climate change is considered a significant global risk.
We are actively assessing ways to mitigate the risks, and identify opportunities in supporting companies to transition to a low carbon economy. We aim to manage climate investment risk in three main ways by:
- Investing in renewable energy opportunities;
- Supporting robust transitions away from coal; and
- Improving our net portfolio carbon footprint over time.
CSC has private investments in renewable assets
Including, but not limited to:
- Solar, wind, hydroelectric and battery development opportunities around the world.
- Building and developing new renewable assets in Australia, Europe, Latin America and the United States, adding to total supply of renewables globally.
There are many facets involved in managing the risks of climate change effectively in the best interests of our customers.
We’re preparing our portfolios to manage the risks and opportunities to our customers’ savings should any particular climate scenario (of the many possible scenarios) eventuate. For example:
- uncertainty about the timing and quantity of government intervention on carbon tax, and at what price;
- or actions from all producers and consumers of old and new energy.
CSC recognises that Australia is a signatory to the international accord of the Paris Agreement, which aims to reduce global greenhouse gas emissions in an effort to limit the global temperature increase in this century to ‘well below 2 degrees Celsius above preindustrial levels’. As a long-term, global investor, CSC explicitly distinguishes between:
Actions CSC can take to hedge customers’ portfolios against climate risks arising from transition, physical impacts, and policy change—such as excluding assets if capital risks are estimated to be well in excess of expected return.
On this basis, the characteristics of our portfolio can appear to be Paris-aligned because the net carbon emissions of our particular portfolio of assets, taken as a whole, have been reducing at a rate reflective of the trajectory required for Paris objectives. However, this measures the characteristics of our portfolio, which can be changed by trading assets that have more or less carbon emitting processes. Trading assets on the secondary market does not directly change the level of carbon being emitted into the atmosphere.
Actions that governments—through policy initiatives, investment in operating organisations, organisational re-design, and supply-chain management—and individuals—through altered patterns of consumption demand—can take to limit greenhouse gas emissions in the real world.
We note that the Paris Agreement involves national decarbonisation commitments, but does not specify objectives for companies or portfolios. We understand that for many existing companies, transition will require higher levels of investment, less free cashflow, and higher operational risk—activities that can be monitored and supported by their material investors/investor cohorts.
We also understand that a key direct route to climate impact is via higher-risk investments in new clean-energy activities that would otherwise not be financed, and in technological innovation capable of leapfrogging existing adoption constraints. We aim to use our influence as investors, where appropriate, to support robust, well-managed policy ambitions for global decarbonisation.
This document outlines our approach to sustainable investment.
We take the risk of climate change, as we do with all of the risks that we must consider in order to build robust investment portfolios that can deliver all of our customers a sustainable retirement income.
Collaboration with global leaders
Since 2001 CSC has been instrumental in collective efforts to address climate change (and other ESG) risks, via membership of the Investor Group on Climate Change (IGCC).
CSC views participation in such collective efforts as the most effective way to minimise overall (non-diversifiable) climate change risk to customer portfolios, as (aside from considerations mentioned above) we do not regard CSC’s investment decisions as capable, in isolation, of affecting the economics of large-scale industrial activities such as fossil fuel-based energy production.
CSC is currently also committed to the Principles of Responsible Investment (PRI), and members of the Global Investor Governance Network (GIGN). We publicly support the global best practice Taskforce for Climate-related Financial Disclosures (TCFD), committing to increased transparency and disclosure of climate related financial risks and encouraging our investment managers and service providers to do the same. The ultimate aim of increased transparency is to make markets more efficient, and economies more stable and resilient.
From 2015, we were an early signatory to the Montreal Carbon Pledge, supported by the Principles for Responsible Investment. In the last decade, it has achieved increased investor awareness, understanding and management of climate change-related impacts, risks and opportunities, with signatories committed to measuring and disclosing their portfolio carbon footprints annually. While the initiative has closed in 2023, CSC will continue to measure and disclose our portfolio regularly.
We also participate in the Carbon Disclosure Project’s (CDP) non-disclosure campaign via our external investment managers. This collaborative effort seeks to increase response rates from previously non-disclosing companies to provide investors with greater transparency and comparability of high-impact companies across global markets, with respect to environmental issues.