Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 443

It's time to assess your super fund’s carbon footprint

We now hear it from just about all corners of our industry - the race to net zero emissions is an investment thematic that can’t be ignored.

However, here in Australia (and many other parts of the world) investors can draw little confidence from the political environment.

Our government is willing to keep kicking the can down the road, begrudgingly agreeing to a net zero 2050 target with a pathway full of technological holes. The problem is 2050 is about 10 election cycles away.

So, we face a hugely-consequential economic transformation that’s not yet a priority for governments and oppositions.

Bigger than government

Despite the lack of political leadership, Australia is in fact doing reasonably well on the climate front. Emissions are falling at the total level, while emissions from electricity generation have halved from their peak. At one stage in September 2021, around 60% of Australia’s electricity demand was fulfilled by renewables.

But it is individuals and corporates responsible for this change, not governments. For families, not only does renewable energy make economic sense, but feeling good for our planet’s future is no doubt part of the motivation.

The same goes for corporates. Many of Australia’s largest companies (and largest emitters) have already adopted some very aggressive carbon reduction targets.

As an example, we recently met with Mineral Resources, which mines lithium and iron ore. Mineral Resources has scoped out over 80 Net Present Value positive projects that will help put it on its path to net zero by 2050, as it moves from a diesel-fueled mining company to a renewables-based electrified mining company.

Companies such as Amcor, CIMIC, Coles, RIO, Telstra and Woolworths have adopted targets of 50% or more carbon emissions reductions by 2030. Wesfarmers’ retail businesses (Bunnings, Kmart, Officeworks) are targeting net zero in 2030.

In some areas companies are literally falling over each other to make their businesses green. Aldi, Coles and Woolworths are all moving to 100% renewable electricity for their stores and distribution centres by 2025 or earlier. Charter Hall is looking for its buildings to go net zero by 2025, not 2050.

Overall, we estimate that approximately 75% of Australian ASX/S&P200 companies by market value have adopted net zero, carbon neutral or net positive carbon targets.

But a damaging carbon footprint remains in investment portfolios

Despite this positive progress, Australian and global companies have a long way to go.

Using Plato’s carbon database, we can assess the carbon footprint of leading investment indices. The chart below shows that if an investor placed $US1 million in an ASX/S&P200 index fund, the equity ownership share of those holdings was responsible for annual emissions of over 133 tonnes of carbon dioxide.

The Australian index is far more carbon intensive than the US or MSCI World markets, reflecting Australia’s industry mix, which is highly weighted to materials and energy stocks and relatively lowly weighted to information technology.

Index Carbon Footprint


ASX 200

S&P 500

MSCI World

Carbon Footprint (tonnes CO2e/USD $M invested)




As of June 30, 2021. Source: Plato, FactSet, MSCI, scope 1 and 2 emissions.

Using this information, we can also estimate the carbon footprint of a typical superannuation investment.

According to the latest information from the ASFA’s superannuation statistics, we find that a typical couple aged 60-64 has assets worth around $650,000. Using just the average exposure to listed equities and property, we estimate this equates to approximately 28 tonnes of CO2 equivalent per annum in emissions through their equity ownership of company emissions.

This is larger than the average emissions of typical Australian household, which sits at around 15-20 tonnes.

For perspective, 28 tonnes is equivalent to 63 return Sydney-Melbourne economy flights, 2.8 return economy flights Sydney-London, or 8.4 medium petrol cars driving around 12,000 kilometres per year.

Unlocking a ‘net zero now’ investment portfolio?

Plato has been able to achieve a net zero carbon footprint without using costly carbon credits in the portfolio of our Plato Global Net Zero Hedge Fund. This is through a combination of shorting high carbon emitting global stocks and going long stocks with below average carbon footprints.

There are also a growing number of other low carbon investment alternatives rapidly emerging in the broader listed and unlisted managed funds space.

Why? The sceptics might argue it’s opportunistic, but like the families and corporates, investors (and many investment managers) are growing more and more carbon conscious and the economics are growing more and more attractive.

An insight into the European market illustrates this, and perhaps provides an insight into why going ‘net zero now’ could be so lucrative for investors in the years ahead. Europe is the most advanced economic block when it comes to decarbonisation, so it provides a strong indication of what’s to come for the laggard economies, such as Australia.

You can see above (left of page), European capital has dominated flows into sustainable funds since 2018. The rest of the world remains markedly behind.

This is no surprise when comparing performance of high carbon intensity stocks versus low carbon intensity stocks in Europe after controlling for sectors. Right of page we see that in Europe high carbon intensity stocks within a sector have underperformed low carbon intensity stocks by cumulative more than 30%.

Remember, Europe has had a price on carbon since 2005. In a regulatory sense it is the most developed market globally when it comes to decarbonisation. This, along with the aforementioned proliferation of flows into sustainable funds has led to that significant outperformance seen by low carbon intensity stocks.

We compare this to the US (light green line) and there is little different between the performance of high carbon and low carbon stocks. However, the rest of the world has no choice but to catch up and we believe a similar market dynamic to what’s occurred in Europe will likely play out across the globe in the years ahead.

Action begins at home

Regardless of what our politicians do, the buck stops with all of us to help limit climate change. When a company or an individual makes an investment decision, be it for a new mine or office building or a new house or car, or even a new appliance, that decision is locking in future emissions for many years.

Indeed, we think the race to net zero will be the most important thematic for investment returns over the next 30 years, but we think the time to reach net zero in your investment portfolio can be now.


Dr Don Hamson is Managing Director at Plato Investment Management. Plato is affiliated with Pinnacle Investment Management, a sponsor of Firstlinks. This article is general information and does not consider the circumstances of any investor.

For more articles and papers from Pinnacle and its affiliates, click here.


February 01, 2022

I'd rather Fund Manager's stuck to their knitting and concentrated on getting the best returns for their customers, given the expensive, excessive fees some charge! Don't join the woke brigade!

SMSF Trustee
February 02, 2022

James, fund managers who take this issue seriously ARE focussing on returns for investors. Whether you like it or not, the world is moving against carbon emissions and anyone who owns assets that produce emissions is taking a risk. Don't you want your fundie to manage that risk? Or would you like to be stranded owning the last, worthless, coal mine in Australia?
This has nothing to do with "wokeness" and everything to do with maximising long run returns.

February 02, 2022

Last time I checked neither wind, solar, batteries or hydrogen were near to solving the emerging European energy crisis. Merkel's all but killed nuclear and now they burn Russian gas, coal, wood chip and oil. The "cart" is way ahead of the horse at this juncture, so let's respectfully disagree that some fund manager's are going a bit woke as the herd charges to "green" energy (at whatever cost). It doesn't mean I want my fund manager to. As Charlie Munger apparently once said: "Show me the incentive and I'll show you the outcome". The incentive for fund managers is to harness concerned investors and hence create "green, ethical" funds!

January 31, 2022

If, as you say, action begins at home, then why haven't you accounted for the significant home gardening services performed by most SMSF trustees (and members). Like planting a tree. Or lots of roses.

January 28, 2022

Let me think about that ... going short a carbon-emitting company is like buying a carbon offset. Doesn't strike me its like planting a tree or installing solar.

Don Hamson
January 30, 2022

Hi Joey. So ok we are not growing trees, but we are punishing high carbon emitters by selling their shares and putting downward pressure on their share prices. We also engage with companies like AGL to encourage them to have a fair dinkum plan to get to net zero. We need to get the companies to reduce their emissions, because there are only so many trees one can plant. If we can help make a company decide to install solar and reduce their emissions that is a win.


Leave a Comment:



Mike Murray on watching for the changing narrative

10 lessons from Larry Fink's 2022 Outlook

John Woods on diversification using asset allocation


Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Meg on SMSFs – More on future-proofing your fund

Single-member SMSFs face challenges where the eventual beneficiaries (or support team in the event of incapacity) will be the member’s adult children. Even worse, what happens if one or more of the children live overseas?

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Latest Updates


'It’s your money' schemes transfer super from young to old

Policy proposals allow young people to access their super for a home bought from older people who put the money back into super. It helps some first buyers into a home earlier but it may push up prices.

Investment strategies

Rising recession risk and what it means for your portfolio

In this environment, safe-haven assets like Government bonds act as a diversifier given the uncorrelated nature to equities during periods of risk-off, while offering a yield above term deposit rates.

Investment strategies

‘Multidiscipline’: the secret of Bezos' and Buffett’s wild success

A key attribute of great investors is the ability to abstract away the specifics of a particular domain, leaving only the important underlying principles upon which great investments can be made.


Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.


Confession season is upon us: What’s next for equity markets

Companies tend to pre-position weak results ahead of 30 June, leading to earnings downgrades. The next two months will be critical for investors as a shift from ‘great expectations’ to ‘clear explanations’ gets underway.


Australia, the Lucky Country again?

We may have been extremely unlucky with the unforgiving weather plaguing the East Coast of Australia this year. However, on the economic front we are by many measures in a strong position relative to the rest of the world.

Exchange traded products

LIC discounts widening with the market sell-off

Discounts on LICs and LITs vary with market conditions, and many prominent managers have seen the value of their assets fall as well as discount widen. There may be opportunities for gains if discounts narrow.



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.