Managing climate risk is a core fiduciary responsibility
U Ethical, an Australian not-for-profit ethical investment manager, has released its latest Climate Risk Report, highlighting that portfolio carbon intensity continues to be significantly lower than the benchmark and stepping up pressure on Australian banks to align their financing with the Paris Agreement.
The Climate Risk Report outlines U Ethical’s broader climate strategy which provides a transparent view on how U Ethical assesses, manages, and acts on climate related risks and opportunities across its portfolios – including the use of scenario modelling, fossil fuel exclusions, and a firm commitment to investor stewardship.
“We believe managing climate risk is a core fiduciary responsibility. Climate change is no longer a distant threat, it’s a present-day financial risk, and we’re using our seat at the table to push for real, measurable action,” said Jon Fernie, chief investment officer at U Ethical.
Holding institutions accountable
As an active ethical fund manager, U Ethical is spearheading a collaborative engagement initiative with Australia’s major banks to press for the phasing out financing of fossil fuel projects that are not aligned with a net zero transition.
U Ethical has taken a lead role in coordinating direct engagement with ANZ, NAB, Westpac, CBA, and Macquarie Group – pressing for credible transition pathways, more transparent emissions data, and cessation of financing for unaligned fossil fuel projects. The working group commenced in 2024, and further meetings are scheduled for later this year.
Beyond banks: Other key findings from the report
- More than 80% lower financed carbon emissions (Scope 1+2) in U Ethical Australian Equity portfolios compared to market benchmark (S&P/ASX 300 Accumulation Index)
- 93% of Australian Equity portfolio companies have set greenhouse gas emission reduction targets.
- 25 climate-related shareholder resolutions voted on, with 92% support for proposals.
- Active participation in investor alliances such as Climate Action 100+, IGCC, and UN PRI.
Ethics in action
With a long-standing fossil fuel exclusion policy and a strong track record in climate-conscious investing, U Ethical’s Climate Risk Report uses the Taskforce on Climate-Related Financial Disclosures (TCFD) framework to provide clarity on its approach to risk management, strategy, governance, stewardship, and opportunities – and how it measures its progress.
“Our climate-related action is aimed at creating long-term value for our clients, while also supporting global efforts to limit climate change to 1.5° C above pre-industrial global temperature levels, in line with the Paris Agreement,” said Rachel Alembakis, stewardship manager at U Ethical.
“Through the TCFD framework, we’ve been able to narrow our approach and demonstrate that aligning finance with a low-carbon economy is not only possible, it’s increasingly necessary.”
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