Alphinity Sustainable Share Fund is extending its exclusions to cover all fossil fuels

04 Jun 2020

Alphinity Sustainable Share Fund aims to support companies that contribute to the UN Sustainable Development Goals and that display good ESG practices. It had previously excluded most companies that produce what we refer to as “High-Impact” fuels. By that we meant those most damaging to the environment and/or social cohesion, such as thermal coal, arctic drilling, oil sands, fracked gas and uranium. This left only oil and gas as allowable investments in the fossil fuel space.

After a thorough review into the way in which oil and gas companies contributes to or detracts from the Affordable and Clean Energy Goal (SDG 7) and to the Climate Action Goal (SDG 13), we have concluded that the Fund should no longer invest in companies which have a material exposure to oil and/or gas production unless we are convinced that they have clearly demonstrated commitment and have credible plans to reduce their scope 1, scope 2 and scope 3 greenhouse gas emissions on a trajectory aligned with the Paris Agreement. The 10% revenue materiality threshold remains in place.

Not adequately addressing Climate Change poses an existential challenge. Our in-depth analysis concluded that not only is unabated fossil fuel production incompatible with the achievement of SDGs, and therefore with Charter under which the Fund operates, but also that reducing GHG emissions of activities using these fossil fuels to the point of carbon neutrality is already affordable today when the significant external costs of using fossil fuels, including climate risks, are taken into account. A detailed explanation of how we have to come to this conclusion can be found here.

The larger cap companies that were already excluded from the Sustainable Investment Universe are shown below.

  • Santos (coal seam gas fracking)
  • Oil Search (artic drilling)
  • Origin Energy (Coal seam gas fracking and thermal coal)
  • AGL (thermal coal)
  • Aurizon (thermal coal)
  • WOR (oil & gas)
  • Orica (Thermal coal)
  • South 32 (Thermal coal)

This change further excludes the following companies:

  • Beach Energy (oil and gas)
  • Woodside Petroleum (oil and gas)
  • BHP (oil and gas, thermal coal)

We believe the change further aligns the Fund to a philosophy of directing investments only towards companies we feel are part of the solution rather than part of the problem.