Colonial First State is Australia’s third biggest super fund by assets under management, controlling a whopping $87 billion worth of members’ retirement savings across more than 2 million member accounts. This means nearly one in every 10 working Australians has at least some of their super with Colonial.

By any measure, Colonial First State is massive. But despite the fund’s size, and all the resources at its disposal, our recent Risky Business report found that Colonial disclosed no evidence that it was managing climate risk. Since that research was conducted, CFS has added a reference to climate risk in its Product Disclosure Statements, and published this explainer on climate risk. This elevates the fund into the “inadequate” category, still keeping its members largely in the dark on the issue.

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What has Colonial First State said about climate risk?

Colonial First State does not mention climate change in its Environmental, Social and Governance (ESG) Policy and, as we know how CFS defines ESG risks is entirely up to them. CFS offers no options that restrict fossil fuel investments in any way. CFS is a signatory to the UN Principles for Responsible Investment, but has not joined any climate-specific investor groups, such as the Investor Group on Climate Change, nor signed on to the Paris or Montreal climate pledges.

Recently, Colonial First State added the following section to its FirstChoice Product Disclosure Statements:

“The value of individual securities may be influenced by environmental, social and governance factors. These factors include the potential impact that climate change and global warming may have on the valuation of a security. For example, a company’s revenue may be reduced due to weather events, and this may then reduce the value of the company’s shares.”

In its July post on climate risk, CFS did an admirable job of explaining how climate risk manifests itself in investment portfolios, and addressed the difficulty of determining which companies are doing a good job it, citing AGL Energy as an example. However, in concluding that “asking the right questions and getting the right information is the key to success”, CFS made the case for greater disclosure to its own members.

CFS have taken the first steps towards communicating climate risk to members. But there is still no public disclosure around how the fund managers on its platform manage that risk, nor how it plans to assist members to manage the risk themselves.

Group disconnect

Colonial First State is part of the Commonwealth Bank Group, whose Group Environment Policy reads (in part):

“We will integrate environmental considerations into investment products and services we create to help customers and clients meet their financial goals; and,
We will provide our customers and clients with the transparency and tools they need to make their own choices on environmental matters in connection with our investment products and services.”

These commitments were made in 2015, and intended to apply to all businesses within the group. Yet two years later, Colonial has still not provided members with any information about how the fund takes environmental or climate matters into consideration.

Commonwealth Bank’s first ever Climate Change Policy Position Statement, released in August 2017, makes no reference whatsoever to Colonial First State and, even though it commits the company to implementing the Financial Stability Board’s recommendations on climate risk disclosure, offers no guidance as to how customers and members will be informed of the climate risks they are exposed to.

CFS itself says that carbon footprinting, and understanding which property and infrastructure are exposed to extreme weather events is needed to make the right decision, yet it doesn’t provide this data to members.

What is Colonial First State invested in?

Of the limited holdings that are disclosed, we know that in CFS’s MySuper options are invested in various pure play fossil fuel companies, including Beach Energy, Whitehaven Coal and Woodside Petroleum.

CFS’s MySuper options are also invested in diversified fossil fuel companies including AGL Energy, BHP Billiton, Macquarie Group, Rio Tinto and Wesfarmers – as well as a number of fossil fuel lenders and service providers. The very least CFS could do would be to disclose greater portfolio holdings data.

Holdings data as at 31/12/2016 (Reference). See the funds table for holdings data on other Colonial First State options.