The long-term investment horizons of superannuation funds make them acutely vulnerable to the systemic disruptions associated with climate change. As investors in Australia’s largest companies, including big corporate emitters, superannuation funds can play an important role in Australia’s economic decarbonisation.
There are indications this sector is starting to transition. Conscious of the commercial implications of climate risks and of regulatory, legislative and policy requirements for action, institutional investors are acting to address the likely impacts of global warming. Under pressure from regulators and customers, many are emphasising engagement activities, such as asking the companies in which they invest to disclose – and, in some cases, address – their climate risks. Superannuation funds are themselves making commitments to reduce emissions funded through their investment portfolios, a further sign of gathering momentum for change.
This superannuation sector report highlights the actions of 20 Australian superannuation organisations, and the commitments they have made to address emissions funded through their investments. It evaluates their alignment with the goal of net zero emissions by 2050, a key element of the Paris Agreement.
This study highlights the importance of engagement in transitioning portfolios towards net zero. At present, the strategies adopted by most funds are centred on investee engagement, rather than the setting of net zero targets. In addition to encouraging greater disclosure from the companies in which they invest, some funds now ask the biggest emitters in their portfolios to align their strategies with the goals of the Paris Agreement through initiatives such as Climate Action 100+.