Coal stocks owned by Cbus, which also include BHP, Rio Tinto and Whitehaven Coal, are held in index funds – a passive form of investment conducted by a third party that tracks a benchmark – and make up less than 1 per cent of its total investment portfolio (0.23 per cent). Cbus chief investment officer Kristian Fok said the fund has "very small exposure" to coal and selling off its holdings was not a priority as it would not have significant impact on reducing global carbon emissions. He argued that keeping the shareholdings gave the fund the power to create change. “Divestment is a simplistic approach that has limited scope in itself to reduce emissions,” Mr Fok said. “Influencing change requires a seat at the table.” Cbus backed almost all resolutions put forward by the coal companies it has invested in at most annual general meetings. The fund was criticised by environmental groups for not backing a push that would force energy utility AGL to phase out its coal-fired power stations more quickly. A spokesperson for green investment activists Market Forces, Will van de Pol, said the fact Cbus’s coal investment was in index funds was not an excuse. “The simple fact is that any investment in a company is a vote of support for its business model.”

He also dismissed the strategy that engagement with coal companies can bring about change. “You can't engage a coal company out of being a coal company." Cbus' endorsement of coal producers corporate governance includes backing remuneration reports and the re-elections of directors. It voted against recommendations by a combination of proxy firms, including Glass Lewis – which advise institutional investors on how to vote at general meetings – on less than 7 per cent of occasions. In a statement, Cbus said the fund voted on three climate resolutions in 2019 for the coal companies it has invested in, supporting two put forth by BHP and against that of Rio Tinto "on the basis of our engagement and that they had largely addressed the substantive issue in the resolution". The fund voted for 16 out of 17 proposals put forward by China Shenhua Energy, which produced 71.5 million tonnes of coal and also sold 187,000 tonnes of coal chemicals including the ingredients needed to make plastic between January and March last year. These included green-lighting a “Mutual Coal Supply Agreement” as well as fees paid to directors and supervisors. The sole proposal Cbus voted down was the re-election of the company's chairman Wang Xiangxi.

Cbus's responsible investment policy lists climate change as the number one investment principle. Former Victorian premier Steve Bracks, chairman of Cbus, has also been vocal on environmental matters, recently taking to Twitter three times to criticise the government’s policies on climate change.

Outgoing Cbus chief executive David Atkin spoke earlier this year to The Age and Sydney Morning Herald of the importance of being “active investors” when it comes to climate change. “We need to be not passive and not just sitting and accepting whatever the marketplace delivers up to us,” Mr Atkin said after announcing his resignation in January. Loading Mr Fok said Cbus was undertaking a scheduled review of climate change commitments and this would include looking at how carbon risk may be transitioned into other areas of the portfolio, such as the index portfolios. “In March 2020 we will roll out a carbon transition risk signal across our quantitative strategies which will ultimately apply to around 40 per cent of our global equities portfolio," Mr Fok said.

“This assesses both carbon footprint and a companies’ plans to lower its carbon exposure. We estimate that this will substantially lower our aggregate portfolio carbon intensity, including exposure to the stocks referred to in your query." Mr Fok pointed to the $540 million Cbus has committed to “climate opportunities”, including investing in renewable energy project Bright Energy Investments in Western Australia. “Cbus is working with investors to support the companies we own shares in to transition to sustainable, low-emission business models. By working together, we have been able to guide meaningful change. “That change is picking up speed and we will support these companies to follow through on their plans. However, where ongoing engagement is proving unsuccessful in influencing change or companies are being unresponsive, we have an escalation policy that includes exiting a stock as a final option. Loading

“The aim must be to transition to a climate resilient global economy that is less reliant on fossil fuels. The way you get there is through companies reducing their emissions, rather than investors simply reducing their exposure.”