Mar 16, 2010 - 8:00am
In January the US Securities and Exchange Commission (SEC) ordered corporations to disclose in their annual reports climate change risk and the G20 Financial Stability Board is recommending regulations to prevent long-term systemic risks (of which climate change is one) such as those that led to US-sub prime meltdown.
“The leading funds appear to be waking up to the fact that they cannot afford to wait for either the detail of the G20 regulation or any equivalent of the US SEC legislation imposed on ASX firms and are acting early to ensure they become best practice,” said Mr Poulter.
With the expected release of the Cooper review in June, The Climate Institute and the Australian Institute of Superannuation Trustees (AIST) has released the results from its second annual survey of funds on how they manage, or plan to manage, the risks and opportunities associated with climate change.
“It’s good to see that eight funds have raised the bar in the management of the climate risks facing our $1.2 trillion superannuation industry. It is hoped that other funds can benefit from the work of these leaders as the bar will need to go a lot higher in years to come,” said Andrew Barr, Policy & Research Manager at AIST.
”Cooper has already signalled that the balance between competition and regulation will be a key focus of his review. Climate change is an area where collaboration serves us better than competition, and we hope the survey itself can now play an important role in starting that collaborative dialogue.”
In the world’s only survey of super funds’ management of climate change risk and opportunity, 102 funds were issued the survey, and just over 32 funds - representing AU$302 billion under management - responded (half the licensed industry).
For the first time, participating funds have been rated and ranked, with a top quartile of funds emerging – they are (in alphabetical order) AustralianSuper; Cbus; Christian Super; HESTA; HOSTPLUS; Local Government Super; NGS Super and Vision Super. Individual responding funds will be provided with a comprehensive confidential report of their performance.
The group of eight leading funds was found to be stronger than their peers in managing their investment managers, having clearer climate change policies and governance, and better identified investments in low carbon assets.
Some key survey findings include:
- Active Ownership – positive signs for engagement in active ownership. Seventy-eight per cent of surveyed funds showed a high level of willingness to participate in shareholder resolutions relating to climate change.
- G20 Recommendations – despite the G20 Financial Stability Board’s recommendation on preventing future systemic risk such as those that lead to the US sub-prime collapse:
- Only 3% intend to alter their investment management agreements so that they have longer investment horizons
- Only 9% of funds see the G20’s recommendations as having substantial implications for long-term risk management procedures and 38% see no impact foreseeable.
- Fiduciary duty - confusion over the scope of fiduciary duty. Only 38% of surveyed funds viewed the consideration of ESG issues as being consistent with their fiduciary duties and/or the sole purpose test.
Read the super survey briefing paper
- Capability - a communications “stalemate” between Asset Consultants and the superannuation funds themselves on climate change issues. Most funds rely on their asset consultants or investment managers for climate change advice. However, a joint AIST/The Climate Institute survey in 2009 found that only 22% of asset consultants could asses their climate change risk exposure in all asset classes.