Top superannuation investor John Pearce warns Australia could be excluded from future trade deals with a net zero by 2050 commitment

A top superannuation investment manager is warning that Australia risks being excluded from future trade deals unless the Prime Minister commits to a target of net zero emissions by 2050.

John Pearce, chief investment officer of the $100 billion UniSuper superannuation fund, says the nation's international reputation will continue to be damaged unless there's faster action to decarbonise the economy and to phase out dirty fossil fuel assets.

LISTEN to my interview with John Pearce

"At the moment, it's just reputation. The bigger concern I have is that it will become real for Australia when potentially we're excluded from trade deals. So quite frankly, the quicker we sign up for net zero 2050 the better," Mr Pearce to the ABC's AM program.

"At a time when we're seeing relationships with China in particular at quite a low ebb, the last thing Australia can afford is to compromise any relationships we have with our other trading partners. So it's more urgent than ever to get to a net zero target without one hand tied behind our back."

One of Australia's most respected fund managers, Mr Pearce said corporate Australia is moving more rapidly in decarbonising with net zero emissions targets despite the lack of a 2050 commitment from the federal government. 

"Corporate Australia and indeed corporates around most of developed world are just getting on with it. Corporates are not waiting for government policy or whether the government commits to net zero by 2050, which we hope that logic and sanity will prevail. But in terms of corporates, they're just not waiting for it," Mr Pearce said.

"We hear a lot about Australia as a country not coming to net zero by 2050. My colleagues and I are going to be a little bit embarrassed if the Prime Minister fronts up at the end of the year and we we still haven't made that commitment." 

UniSuper's latest Climate Risk Report released today underscores progress in decarbonisation with 40 of 50 companies in the fund's portfolio setting Paris-aligned climate targets.

The report says 0.4 percent of the UniSuper is exposed to fossil fuel extraction with overall fossil fuel exposure down to 2.5 percent from 5 percent last year.

Mr Pearce's warning comes after resources giant BHP announces plans to sideline its oil and gas assets in a merger with Woodside Energy to create a $41 billion goliath.

But Mr Pearce questioned commentary from BHP chief executive Mike Henry that the proposed deal was not motivated by climate concerns or investor pressure to exit fossil fuels.

"BHP has pointed out that they're not doing this deal with Woodside in reaction to activists. That may be true," Mr Pearce said.

"The question is - would they have done this without the pressure that they're under? I doubt when the BHP would have made these decisions in the absence of the decarbonisation trend."

Despite the move to decarbonise its investments, Mr Pearce said simply divesting was not necessarily the answer and that funds could retain a major impact by owning stakes in companies as tools of influence.

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