Despite recent guidance from the Australian Prudential Regulation Authority (APRA), which identifies climate risks as “distinctly financial in nature” and that “many of these risks are foreseeable, material and actionable now”, 82 of Australia’s 100 largest superannuation funds disclose inadequate or no tangible evidence that they have considered the impact of climate risk on their investment portfolios.
According to a recent legal opinion, “climate change risks can and should be considered by trustee directors to the extent that those risks intersect with the financial interests of a beneficiary of a registrable superannuation entity” . Furthermore, according to Barker et al., “passive or inactive governance of climate change portfolio risks is unlikely to satisfy [trustees’] duties” . Superannuation fund trustees who fail to consider and disclose climate risks are thereby putting themselves at risk of breaching their duties to members.
Market Forces’ analysis of Australia’s 100 largest superannuation funds, representing 99% of all large superannuation fund assets , found that:
- 60 funds disclose no tangible evidence that they have considered the impact of climate risk on their investment portfolios; these funds are responsible for over $393 billion or 29.2% of all large superannuation fund assets and 8.8 million member accounts;
- 22 funds disclose inadequate evidence that they have considered climate risk ($306 billion or 22.8% of large superannuation fund assets and 5.2 million member accounts);
- 18 funds disclose adequate evidence that they have considered climate risk ($646 billion or 48% of large superannuation fund assets and 12.4 million member accounts);
- Retail funds represent the largest proportion of assets under management of the group of funds that disclose no consideration of climate risk (52%);
- Funds that disclose no consideration of climate risk are typically smaller;
- Corporate funds do not seem to be influenced by their parent policies - there is a significant disconnect between the lack of action in addressing climate risk between corporate funds and the policies of their ‘group’ or ‘parent’ companies;
- Just nine funds provide regular updates or research to members on climate risk; even those funds providing ‘Adequate’ disclosure publish limited regular updates or company/investment specific information.
This report does not seek to rank funds other than by which meet certain criteria for climate risk disclosure.