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Climate change can pose significant risks – not only to the environment, but to the broader economy and to society as a whole.

 

Typically, climate change risks can be split between:

Physical risks

From the direct impact of climate change on our physical environment, including:

  • through loss of resource availability and biodiversity
  • supply chain disruptions
  • damage to assets from severe weather events such as storms, floods, fires, droughts, tornados, hurricanes/monsoons, tsunamis and earthquakes
  • rising global average temperatures; and
  • rising sea levels and ocean carbonisation.

Transition risks

From the much wider set of changes in policy, law, markets, technology and prices to address mitigation and the adaptation requirements which are necessary for the transition to a low-carbon economy.

Managing climate change risks

At Colonial First State, we recognise that poor company management of climate change risks could result in financial losses, litigation liabilities, and the devaluation of tangible and intangible assets – all of which could impact shareholder value and increase the volatility of investor returns.

It follows that the careful investment management of ESG and climate risks could help to improve potential long-term performance and, as a result, any risk-adjusted returns for investors in company securities and physical assets.

Contributing to change

In line with our commitment to reducing emissions, we measure the climate-related risks of our investments. We report the carbon emissions of equities across the FirstChoice range within the CBA Annual Report.

Trend of carbon emissions over time

Graph of carbon emissions over time

The three FirstChoice Lifestages cohorts shown are representative of all of our FirstChoice Lifestages. They represent the largest volume of funds (1970–1974), the largest number of members (1980–1984) and the largest average balance (1960–1964). The data shown here is to 30 June 2019.

Our reductions when converted to cars on the road

Car emissions graph

Note: The equivalent number of cars data is sourced from United States Environmental Protection Agency Greenhouse Gas Equivalencies Calculator: https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

As you can see from the graph above, each of the FirstChoice Lifestages portfolios has carbon emissions that have been reducing since we began measuring them in 2016.


For example, the FirstChoice Lifestages 1980–84 portfolio produced carbon emissions equivalent to 10.5 cars on the road per $100, 000 invested at 30 June 2016 which reduced to 6.6 cars on the road per $100,000 invested at 30 June 2019 – a reduction of almost 40%.


We’re also working towards not only improving our current capabilities, but on identifying and offering new investment solutions for you.

Disclaimer

Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (Colonial First State) is the issuer of the FirstChoice range of super and pension products from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557. Colonial First State also issues interests in products made available under FirstChoice Investments and FirstChoice Wholesale Investments. This document may include general advice but does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. The PDS and FSG can be obtained from colonialfirststate.com.au or by calling us on 13 13 36.