HESTA CIO: Avoided emissions ‘don’t build trust’ in carbon markets

HESTA CIO Sonya Sawtell-Rickson told the ASFA Conference that having confidence and trust in biodiversity credits was vital to ensuring they become investable.

Sonya Sawtell-Rickson, chief investment officer at Australian superannuation fund HESTA, has said that receiving credit for avoided emissions may undermine trust in carbon markets.

L-R: Sonya Sawtell-Rickson, CIO, Hesta; Adrian Ward, CEO, Accounting for Nature; Andrew Saunders, head of natural climate solutions, QIC

Speaking on a panel discussing biodiversity at the Association of Superannuation Funds of Australia Conference in Brisbane last week (21-23 February), Sawtell-Rickson was asked for her views on how carbon and biodiversity credits should be scrutinized to ensure legitimacy.

She said: “I think that there is a difference between avoidance and repair, and I think that’s been a real issue in the carbon market.

“[To say] ‘well, we didn’t keep emitting and therefore we should get benefits for that’, it doesn’t feel like that builds trust. Yes, avoidance is needed – but what’s needed is a lot of repair […] Having the visibility of what you’re actually getting through a biodiversity credit is key.”

On biodiversity credits specifically, Sawtell-Rickson said they were generally “very different” to carbon credits, because they can be more broad and diverse compared with carbon credits, which are usually account for a single metric: the amount of carbon that has been sequestered or not emitted.

HESTA has just under A$70 billion ($47.2 billion; €44.5 billion) in assets under management and has committed to reach net zero carbon emissions across its portfolio by 2050, with an interim target of a 50 percent reduction in emissions by 2030 against a 2020 baseline.

Sawtell-Rickson said that members of the fund “don’t really talk about biodiversity specifically”, although they do find that people are attracted by the fund’s environmental targets.

“When we observe our members, one of the top four reasons they come to HESTA is because of our environmental approach. For our sustainable growth members, our sustainable growth options, it’s the top reason they come to HESTA.

“Now, they’re not specifically defining what environmental practices mean and when we ask them it goes through everything from climate to land use. We haven’t seen biodiversity as a word come up – but species protection comes up [so] it’s on the radar and will grow,” she said.

Sawtell-Rickson added that conversations around biodiversity feel “like it is where climate was 10 years ago,” and that lessons could be learned from the evolution of those debates to produce a more agile and effective roadmap for investors.

“When we thought deeply about systemic risks […] what became very evident was that there are two really significant material risks that we’re facing: climate change and biodiversity loss,” she said.

She said the agreement reached at COP15 in Montreal in December 2022 was a “great development” and a “really great acknowledgement” of the role that private finance can play in protecting biodiversity.