Four of the S&P/ASX 200 Index (ASX: XJO)'s biggest energy shares – AGL Energy Limited (ASX: AGL), Origin Energy Ltd (ASX: ORG), Santos Ltd (ASX: STO), and Woodside Energy Group Ltd (ASX: WDS) – have been put on notice by HESTA.
The $68 billion superannuation monolith has a new target to slash emissions by 50% across its portfolio by 2030.
To get there, it's demanding that the energy giants show that their climate change strategies align with the Paris Agreement goals. They may be dumped from the fund's portfolio if they fail to meet its objectives.
The S&P/ASX 200 Energy Index (ASX: XEJ) is trading in the green today, gaining 0.27%. Meanwhile, the ASX 200 is up 0.18%.
Looking to the four stocks put on HESTA's watchlist, the Santos share price is in the lead, having slipped 0.06%.
The Woodside share price is coming in next best, falling 0.3%, while shares in AGL and Origin are down 1.5% and 2% respectively.
Let's take a closer look at the super fund's latest move towards net zero.
HESTA issues warning to ASX 200 energy shares
HESTA has lifted its interim emissions reduction target to 50% by 2030, up from 33%, across its portfolio on a 2020 baseline. That will see it well on the way to achieving its net zero emissions target by 2050.
The fund has also written to the chairs of four ASX 200 energy shares found to be facing "significant decarbonisation challenges". It's concerned with disparities between the companies' strategic targets and a 1.5 degree Celsius transition pathway.
The four stocks will now face closer engagement and monitoring by the fund. It has asked Origin, Santos, and Woodside how final investment decisions on major projects align with a 1.5 degrees Celsius pathway.
HESTA's framework also considers voting against 'say on climate' resolutions and directors' elections, and supporting or filing shareholder resolutions. It also allows for divestment where there's a lack of evidence of addressing risks, and it's in members' best financial interests.
HESTA invests around $720 million in the four ASX 200 shares, the Australian Financial Review (AFR) reports.
Speaking to the publication, HESTA CEO Debby Blakey said:
We would like to see faster progress … There's some incredible information as to this being the decade where we have to act.
HESTA voted against the climate plans of Santos and Woodside in May this year. It also took on the lead engager role through Climate Action 100+ as part of its escalation with AGL.
The fund already excludes companies dependent on thermal coal. That includes ASX 200 share Whitehaven Coal Ltd (ASX: WHC), which is currently trading at a record high.
