The Australian Retirement Trust, Australia’s second-largest pension fund, has announced it will cease most investments in thermal coal companies from July 2024.

The decision is part of the fund’s strategy to reach net-zero emissions by 2050 across its entire portfolio.

The A$280bn ($183bn) fund has implemented new criteria to exclude companies that derive more than 10% of their revenue from thermal coal mining and sales.

The fund has outlined specific exclusions to its policy. These include pooled derivative products with indirect exposure to thermal coal companies and companies that generate revenue from metallurgical coal for steel production, internal power generation, intra-company coal sales, coal trading and royalty income from entities not directly involved in thermal coal extraction.

The updated investment policy places thermal coal on the list of excluded investments, alongside tobacco, cluster munitions and landmines.

This information has been detailed in a notice on the fund’s website.

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The move has been applauded by climate activists, who noted that the Australian Retirement Trust is the largest Australian pension fund to take such a step against thermal coal investments.

The company said in its statement: “As a global investor, the Australian Retirement Trust is committed to achieving a net-zero greenhouse gas emissions investment portfolio by 2050.

“The Australian Retirement Trust applies exclusions in limited circumstances as part of its sustainable investment approach in accordance with members’ best financial interest.”

Thermal coal, which encompasses the mining and sale of lignite, bituminous, anthracite and steam coal, will no longer be part of the fund’s product offerings.

European pension funds and banks have already begun to divest from major oil and gas companies and reduce financing for fossil fuel projects.

The decision aligns with the global commitment to transition away from fossil fuels, as evidenced by the recent agreement between G7 nations to shut down coal-fired power plants by the mid-2030s and the COP28 summit’s resolution in December 2023 to phase down coal power use.