Concerned Australians now have the ability to become superannuation activists with the release of a report highlighting the necessity for superannuation nest eggs to be protected from carbon and climate change risks.
Climate Smart Super: Understanding Superannuation & Climate Risk, released by environmental think tank The Climate Institute, is the first report of its kind.
As such it offers information for individuals to learn more about their super funds and how to engage with their super funds in relation to the investments made on their behalf.
It reveals that while trustees managing superannuation funds have a fiduciary duty to manage for climate and carbon policy risks, few are able to demonstrate they are acting on that duty.
The report was released alongside results of this year’s global survey of 1000 of the largest asset owners, most of whom are super funds.
“Superannuation funds are often Australians’ biggest or second biggest asset but until now very few have had accessible information enabling them to take an active role in managing that asset against climate and carbon policy risks,” said John Connor, CEO of The Climate Institute.
“This report reviews superannuation in the context of climate change, both in terms of how retirement savings might be exposed to climate risk and how those savings can help transition Australia to a clean energy future.”
“It offers a number of simple steps to assist people to engage with their super funds so that they can move from being accidental to active investors and start challenging the dangerous short term focus in business and politics that threatens retirement savings,” Mr Connor said.
Highlights from the report include:
- The launch of the 2013-14 Asset Owners Disclosure Project climate index rankings of the world’s 1,000 largest asset owners (super funds and sovereign wealth funds). This year four of the top 10 global funds are from Australia, but a UK fund has toppled an Australian fund at the top.
There is a trend of higher-ranked funds providing more disclosure, especially when driven by activist campaigns. This, in turn, grows the emerging “civil economy” of people interested in having a say in how their retirement savings are invested.- Less than 2 per cent of the $30 trillion currently held by retirement savings funds is invested in low carbon technologies and other climate change solutions.
- The view that trustees managing superannuation funds have a fiduciary duty to manage for climate and carbon policy risks but few are able to demonstrate they are acting on that duty.
- Individual fund members have the right to engage with and to expect replies from those managing their funds.
Upwards of $1.6 trillion is under super funds’ management in Australia, invested in local and overseas markets.
That is the same global figure that climate change is said to be costing annually, with those costs expected to rise to over $4 trillion by 2030.
For Australia, conservative estimates for annual costs of unmitigated climate change on infrastructure alone are about $9 billion by 2020 and $40 billion by 2050.
“Numerous reports from banks, investment groups and others now highlight that serious climate action means many high carbon investments may turn out to be worthless, with a large majority of fossil fuels needing to be left in the ground.
“This could have a huge impact on superannuation funds,” Mr Connor said.
Climate Smart Super: Understanding Superannuation & Climate Risk and associated content, including infographics, videos and a podcast, can be found at www.climateinstitute.org.au/climate-smart-super.html
