David Neal on what steps IFM Investors will take to reduce greenhouse gas emissions

After the Sustainable Investment Forum North America, Climate Action caught up with David Neal, Chief Executive of IFM Investors, to discuss what steps the company will take to reduce greenhouse gas emissions.

At IFM Investors, why have you made net zero by 2050 commitments?

At IFM Investors, our purpose is clear: to protect and grow the long-term retirement savings of working people. We invest on behalf of more than 30 million people globally, including millions of Australians through their superannuation and pension funds. To deliver on our purpose, it is crucial that we have a plan to mitigate climate change risks. This view is increasingly held by other long-term investors, companies, financial regulators and governments globally. And it is a major reason we have seen an acceleration in net zero by 2050 commitments over the past 18 months, despite the challenges of the COVID-19 pandemic. At IFM, we are making investments in essential infrastructure assets – in sectors such as transport, utilities and energy – that our investors expect to hold for the long term, in many cases, for decades. If these investments are to generate strong, long-term, sustainable returns, we need to help ensure that they continue to play an important role in a net zero economy. That is why last year we committed to reducing greenhouse gas emissions across our asset classes – infrastructure, listed equities, debt and private equity – targeting net zero by 2050. And it is why we have now set an interim emission reduction target for our infrastructure assets of at least 1.16 million tonnes of CO2e by 2030, reflecting a 40 per cent reduction in emissions across our infrastructure portfolio. We did this because we know that to meet our net zero by 2050 commitments, action is needed over the next decade.

What steps will IFM Investors take to reduce greenhouse gas emissions across its asset classes targeting net zero by 2050?

We have enhanced our investment decision-making processes to help ensure that new acquisitions are 2050-aligned, and we will continue to work with our infrastructure assets to implement emission reduction initiatives. As part of this, it is clear to us that thermal coal will not have a long-term role to play in the future energy mix, so we will be phasing it out of our existing portfolios by 2030, and will not make new investments in assets that derive material revenue from thermal coal. Infrastructure assets are critical to meeting the needs of economies and communities. They are costly to build and require significant planning and licensing – most cannot just be turned off and replaced. And simply starving these assets of capital by divesting will often be counter-productive to member returns and our society’s transition imperative. Our focus, therefore, is on transitioning these assets to help ensure they can continue operating in a net zero world. In many cases, the skills, capabilities, industry knowledge and relationships of these assets provide the best opportunity to find the most effective transition pathway.

Do you think there are opportunities for investors when it comes to addressing climate change?

We are working hard on the significant new investment opportunities that are arising from the transition to net zero. The International Energy Agency says that by 2030, close to US$1 trillion ($1.37 trillion) will be needed annually for clean energy infrastructure, which is likely to spur the creation and adoption of new technologies, products and modes of transport, which in turn create new business and investment opportunities. By way of example, as a shareholder in Melbourne Airport, we have supported the construction of the recently completed onsite solar farm, which is expected to generate up to 15 per cent of the airport’s annual electricity consumption – enough to power all four passenger terminals. In short, we will continue to use our influence, capabilities and capital to help assets reduce emissions and remain viable and useful in a lower carbon operating environment – thus maintaining, and potentially increasing value. This is in the interests of investors and pension fund members, and also serves the broader society in which we live.

David Neal is chief executive of IFM Investors, which is owned by 23 Australian industry pension funds.

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IFM Investors spoke at the Sustainable Investment Forum North America last month. Missed it? Click here to watch the session on demand!