Problematic companies cannot be ‘divested away’: HESTA

HESTA chief executive, Debby Blakey, has warned companies and superannuation funds cannot just “divest away” problem companies from their investments.

Speaking at the Responsible Investment Association of Australasia (RIAA) national conference, the HESTA chief executive referenced the fund’s argument with AGL last year. 

AGL had been looking to de-merge its company but HESTA voted against the de-merger as it felt splitting up the company would hinder its ability to support economy-wide decarbonisation to meet Paris-aligned targets. AGL was added to the fund’s watchlist and the proposal was later withdrawn in May 2022. 

HESTA removed AGL from its watchlist in March 2023 as it felt the energy company had progressed in its energy transition and outlined to shareholder how it would more appropriately balance risk, returns and decarbonisation. 

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However, it added it would continue to engage with the energy firm as it believed there was additional scope for it to develop its decarbonisation ambitions, including by bringing forward coal-fired power generation closure dates. It could also grow its investment in renewable and energy storage.

Speaking to delegates this morning (11 May), Blakey said: “Now obviously, there is still more to do and particularly for AGL to be more ambitious in reducing emissions in line with the one-and-a-half-degrees pathway. 

“Responsible investors like HESTA can’t divest away from Australia being slow to transition. Instead, we need to push big emitters like AGL to focus more strongly on climate change, to harness the company’s ability to create long-term value and protect members’ investments.”

Since the failed demerger proposal, AGL had refreshed its board with the appointment of a new CEO in Damien Nicks, appointed directors who had experience in energy transition, updated its climate strategy and committed to early closure of coal-fired assets.

She praised AGL’s recent efforts to demonstrate a commitment to move closer to Paris targets and said this would have a “significantly positive impact” on Australia’s pathway to net zero and lower the overall systemic risk exposure of members’ investments.

Referencing the engagement super funds had with their investments, Blakey added: “Investors have never played a more integral role in this action.

“We have a seat at the table and have to use it wisely to build a sustainable market and generate long-term performance.

“We have to use our scale broadly and our influence widely.”