Super funds 'reckless' in handling climate risks: Hewson
How climate proof is your superannuation fund? Photo: Getty Images
Superannuation funds and other long-term investors are handling their climate change risks with “reckless mismanagement”, according to the compilers of an international climate investment index.
A survey of the world's 300 largest retirement funds, insurance companies and other big investors found “many didn't even have a climate policy and many that did hadn't changed investment decisions as a result”, said John Hewson, former Liberal leader and chair of the Asset Owners Disclosure Project (AODP).
Nobody will be able to stock-pick their way out of climate change
The findings paint “a disturbing overall picture of greenwash and reckless mismanagement," he said.
The AODP claims its climate index is the first of its kind to rate funds according to key measures including transparency, risk management and low-carbon investment. Only two funds were deemed to warrant a triple-A rating, one of which was Australia's Local Government Super.
“It's fair to say that the industry is in pretty dire straits when it comes to managing climate risks as a whole,” Julian Poulter, AODP's executive director, said.
The AODP contrasted the involvement in the survey of Local Government Super with $6.5 billion funds under management with the $80 billion Future Fund, which it said didn't participate because of "inadequate resources".
Future Fund spokesman Will Hetherton, though, rejected the claim, saying the government fund took environmental, social and governance issues including climate change "very seriously".
"We get a lot of requests and we have to be selective, and we took the view that participating in this particular survey wasn’t going to be valuable,’’ Mr Hetherton said.
Just 17 of more than 1000 of the world's biggest investors responded to the survey directly while the AODP compiled data on the other funds from publicly available information. The poor response came despite many of the funds regularly calling for listed companies to reveal their climate exposure to such surveys as the Carbon Disclosure Project.
“It's a double standard that can't survive for long,” John Connor, chief executive of the Climate Institute and a member of the AODP board, said.
Mr Poulter said super funds and their fund managers were leaving themselves vulnerable to a “carbon re-pricing event” over the next five to 20 years – such as a further shift by China to de-carbonise its economy – that would trigger a sharp revaluation of fossil-fuel holdings and other exposed investments.
“We don't know how a low-carbon economy will occur but we do know that when it does, it's likely to produce a tipping point that will resemble the sub-prime crisis,” Mr Poulter said, referring to the US debt crisis that sparked the Global Financial Crisis.
“Nobody will be able to stock-pick their way out of climate change.”
Australian firms accounted for seven of the 17 respondents to the survey, including Care Super, Australian Super and NAB staff super.
“If you think there's even a 20 per cent chance of a climate change repricing event in the 2020s occurring, you need to plan for it now,” Mr Poulter said.
“We don't know what shape the repricing event will take around climate change, and we don't know what's going to trigger it, but we do know it's coming and so do the funds.”