Mar 29, 2012 - 8:00am
"Australian superfund HESTA has made a $100 million investment in fund manager IFM’s new low-carbon Australian equities fund. This is an important step as institutional investors begin to work towards innovative ways to manage climate risks and opportunities, ensuring the smoothest possible transition to the low-carbon economy for its members.
The Climate Institute Business Director Julian Poulter said:
“Members of superfunds must take note when their fund acts positively to manage long term climate risks. We welcome the establishment of the IFM fund and HESTA’s objective to achieve equal return from this allocation but ultimately this is about making a larger percentage of their portfolio more robust in the face of future climate change liabilities”
“Only last week, executives from QSuper and the Future fund at CMSF industry conference questioned traditional asset allocation models with David Neal, CIO at the Future Fund, saying you can only control risk and hope that those risk allocations generate returns.”
“This is the perhaps the most pro-active move by an Australian superfund to manage climate risk that we have seen to date. HESTA have signalled to the industry that greater climate stability is available at no risk to returns. It is only a matter of time before members seriously question what their own fund is doing in this area.”
“The allocations, entirely consistent with the recommendations of leading investment advisers Mercer in their ground-breaking report last year is further evidence that the superannuation industry is starting to get innovative about methods to balance fossil fuel risks and climate change opportunities”
“We urge all Australian superfunds to continue to build capabilities to make these decisions in the long-term interests of their members.”
Mercer, one of the world’s leading investment advisors to superannuation and pension funds, recommended an asset allocation strategy with 40 per cent of a portfolio be invested in climate sensitive assets in order to manage climate change risk.
The typical superannuation fund has below 2 per cent of the portfolio invested in low carbon assets.
HESTA’s allocation is moving in line with Mercer’s direction and is further evidence that the superannuation industry is starting to get innovative about methods to balance fossil fuel risks and climate change opportunities.
Superfunds generally invest their member’s money in largely the same way as each other, but there is currently a debate about whether this herd mentality is in members’ best interests in a world with future systemic shocks such as climate change are looming.
For more information
Julian Poulter | Business Director, The Climate Institute | 02 8239 6299"