No bonuses for ‘short-termism’ financial planning Media Releases

Oct 17, 2009 - 8:50am

Eight out of ten people agree that investment managers in the superannuation industry should not receive bonuses based on short-term performance when their job is to protect nest eggs over the long-term, an AUSPOLL survey reveals.

The poll, commissioned by the Climate Institute, also shows that the majority of people, 56 per cent, would like their superannuation fund to invest in solutions to climate change – a major long-term risk to the global economy – such as clean energy.

"In light of the global meltdown, we’re understandably seeing a lot of public hostility toward the ‘Gordon Geckos’ of the financial world and the polling shows that in relation to superannuation people want change,” Climate Institute CEO John Connor said.

“The superannuation investment chain currently rewards managers for short-term profits with little incentive to plan for long-term risks such as climate change.

“The investment incentive chain needs to be fundamentally realigned to promote long-term profitable and sustainable investments in areas such as the emerging low-carbon economy.

"The current financial crisis is an example of short-termism winning out over managing long-term risks and if markets and governments don’t learn lessons from this meltdown we risk history repeating itself.”

The poll found that 79 per cent of people agreed with the statement that ‘managers in super funds should not receive bonuses based on short-term performance when their job was to manage long-term investments’.  Just three per cent disagreed with the statement and 17 per cent had no opinion.

The Climate Institute recently launched a world’s first initiative, designed to assist super funds think long-term and better manage the risks and opportunities of climate change. 

The joint initiative, with the Australian Institute of Superannuation Trustees, includes an interactive survey of 80 of Australia’s largest superannuation, with nearly a trillion dollars under management, and provides them with best practice guidelines to enable them better manage the material impacts of climate change and the consequences of government policy.

In order to look after the long-term interests of members, funds will be encouraged through this initiative to build capability in managing climate risk and opportunity, to invest in companies that have better strategies in place to manage climate risks, and to take advantage of emerging clean technology and carbon permit markets.

“If there is a silver lining to the market turmoil it would be that it shines a light on the dangers of sweeping long-term risks like sub prime mortgages and climate change under the carpet,” Mr Connor said.

“Let’s use the market meltdown as an opportunity to rebuild with incentives that meets super member and community expectations and rewards long-term, sustainable investment which can drive Australia’s transition to a globally competitive low-carbon economy.”

Note:  The AUSPOLL online omnibus survey of 1000 people was taken from 9th to 13th October 2008.

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