By Nick Hedley
Australia’s Cbus Super, which manages assets worth A$70
billion (US$45 billion), has adopted the European Union’s strict emissions
reduction methodologies to ensure it does not overstate the progress it is
making in decarbonizing its portfolio.
The fund says in the third iteration of its climate change
roadmap that it has adopted the methodology proposed in the E.U.’s minimum
standards for climate transition benchmarks and the bloc’s Paris-aligned benchmarks.
This means it will adjust for changes in asset enterprise
values so that its carbon intensity reductions are more accurate.
“At face value we had a 37% reduction [in portfolio
emissions] against our 2019 baseline, but adjusting for asset valuations, we
calculate our real-world emissions reduction since 2019 to be a more modest,
but still significant, 10.79%,” Ros McKay, Cbus’ head of responsible
investment, says regarding the more conservative approach.
“The transparency that we now have in this measure is
liberating,” McKay says. “It gives us a clearer view of the road to achieve
45%. We will be more certain that we have fulsomely discharged our duty to our
members when we get there.”
Cbus has invested “significant time and resources” in
getting its emissions measurement right.
“We know our emissions will not reduce in a straight line
and are committed to explaining what is driving the movements in our
exposures.”
Cbus chief investment officer Kristian Fok says: “As
investors we need to acknowledge that reducing emissions over the next eight
years to meet our 2030 target of a 45% reduction in real world emissions is
going to take a lot of hard work and dedication.”
Fok says the fund is making significant progress already.
“In our first roadmap, we set the expectation that all our
property managers should be on a clear path to net zero carbon by 2030. We have
seen outstanding progress with Cbus Property’s commercial office portfolio
reaching net zero carbon earlier this year – eight years ahead of schedule.”
Cbus will also push to reduce embodied carbon in the built
environment sector, which includes emissions from the manufacturing,
construction, renovation, and demolition of buildings. It is speaking to its
property managers about how they can reduce embodied carbon by 40% by 2030 and
hit net zero by 2050.
“Embodied carbon has been a somewhat vexing issue, with
global building stock set to double by 2050,” Fok says. “It is also where we
see immense opportunities to reduce real world emissions.
The built environment accounts for 39% of Australia’s
emissions, with embodied emissions accounting for 11% on their own, according
to Cbus.
“We are on the lookout for opportunities to invest in new
manufacturing and construction practices, the repurposing and upgrading of
existing building stock and the recycling of construction materials,” Fok says.
“The embodied carbon sector is in the starting gates, and we can see
opportunities to invest in solutions and projects that will generate strong
returns and support the industries that are important to Cbus members.”
Decarbonizing the fund’s portfolio will “deliver better
long-term returns” for members, he says.