RISKY BUSINESS

New research from Market Forces shows 82 of Australia’s 100 largest superannuation funds disclose inadequate or no tangible evidence that they have considered the impact of climate risk on their investment portfolios, potentially exposing fund trustees to legal risks.

Market Forces’ latest research has found that 82 of Australia’s 100 largest superannuation funds disclose inadequate or no tangible evidence that they have considered the impact of climate risk on their investment portfolios.

A recent legal opinion from Noel Hutley SC and James Mack, commissioned by Market Forces, indicates that superannuation fund trustees who fail to consider and disclose climate risks could be putting themselves at risk of breaching their duty to members.

“Climate change risks can and should be considered by trustee directors to the extent that those risks intersect with the financial interests of a beneficiary of a registrable superannuation entity.”

“When formulating an investment strategy and determining an appropriate level of diversification, the financial effect of climate change risk factors may need to be identified.”

– Noel Hutley SC and James Mack.

The legal opinion, along with recent guidance from the Australian Prudential Regulation Authority (APRA) identifies climate risks as “distinctly financial in nature” and that “many of these risks are foreseeable, material and actionable now,” suggest superannuation fund trustees would be well advised to properly consider climate risk and disclose that consideration to members.

Findings

Market Forces’ analysis of Australia’s 100 largest superannuation funds, representing 99% of all large superannuation fund assets, found that:

  • 60 funds disclose no tangible evidence that they have considered the impact of climate risk on their investment portfolios; these funds are responsible for over $393 billion or 29.2% of all large superannuation fund assets and 8.8 million member accounts;
  • 22 funds disclose inadequate evidence that they have considered climate risk ($306 billion or 22.8% of large superannuation fund assets and 5.2 million member accounts);
  • 18 funds disclose adequate evidence that they have considered climate risk ($646 billion or 48% of large superannuation fund assets and 12.4 million member accounts);
  • Retail funds represent the largest proportion of assets under management of the group of funds that disclose no consideration of climate risk (52%) despite Retail funds accounting for just 31% of the assets under management in the 100 largest superannuation funds;
  • Funds that disclose no consideration of climate risk are typically smaller. The median size of the 60 climate laggards is $2 billion, compared to a median of $9.4 billion for those providing adequate or inadequate disclosure;
  • Corporate funds do not seem to be influenced by their parent policies – there is a significant disconnect between the lack of action in addressing climate risk between Corporate funds and the policies of their ‘group’ or ‘parent’ companies;
  • Just nine funds provide regular updates or research to members on climate risk; even those funds providing ‘Adequate’ disclosure publish limited regular updates or company/investment specific information.
Methodology

Market Forces reviewed the public disclosures of Australia’s 100 largest superannuation funds by assets under management, including both APRA-regulated entities, and Exempt Public Sector Superannuation Schemes (EPSSS). Public disclosures included Product Disclosure Statements (PDS), supplementary information to PDS, annual reports, investment policies, ESG policies, climate change policies (where available), periodic investment updates, factsheets and websites. All online sources were accessed during the month of June 2017.

Super funds’ climate risk disclosure was classified against the following criteria:

  • Adequate: discloses a public policy or position statement on climate change, or has published research discussing the impacts of climate risk on its portfolio
  • Inadequate: discloses an Environmental, Social and Governance (ESG), ethical or responsible investment policy that specifically mentions climate change or climate risk without any context or discussion; is a member of the Investor Group on Climate Change or has made a public commitment relating to climate change
  • No disclosure: no mention of climate change or climate risk in any disclosure to members.
Further reading

Noel Hutley SC and James Mack – Superannuation Trustee Duties and Climate Change Risk (June 2017)
Risky Business – full PDF report of Market Forces climate risk disclosure research (August 2017)
Risky Business – full table of funds (PDF)
Recommendations of the Task Force on Climate-Related Disclosures Final report (June 2017)
Geoff Summerhayes (APRA) – Australia’s new horizon: Climate change challenges and prudential risk (February 2017)
Noel Hutley SC and Sebastian Hartford-Davis – Climate Change and Directors Duties (October 2016)

TAKE ACTION

Tell your super fund to improve their climate risk disclosure today!


Where does your fund stand on climate risk disclosure?

Fund Assets under management* Members* Fund Type Climate risk disclosure rating Climate risk disclosure type
AMP $109,809 million 3,585,000 Retail Adequate ESG policy + research
AustralianSuper $103,697m 2,136,000 Industry Adequate Position + research
BTFG $80,115m 1,205,000 Retail Adequate Position + research
First State Super $57,092m 751,000 Public Sector Adequate Position + research
UniSuper $56,646m 421,000 Industry Adequate Position + research
Sunsuper $39,297m 1,137,000 Industry Adequate ESG policy + research
Commonwealth Super Corporation $37,602m 664,000 Public sector Adequate ESG policy + research
HESTA $36,004m 833,000 Industry Adequate Policy + research
Cbus $34,493m 735,000 Industry Adequate Position + research
Mercer $21,956m 214,000 Retail Adequate ESG policy + research
VicSuper $16,655m 240,000 Public sector Adequate Position + research
State Super Retirement Fund $16,354m 75,000 Retail Adequate ESG policy + research
Local Government Super $9,458m 92,000 Public sector Adequate ESG policy + research
Catholic Super $9,318m 73,000 Industry Adequate Policy + research
Russell Investments Master Trust $7,924m 74,000 Retail Adequate ESG policy + research
Vision Super $7,791m 101,000 Public sector Adequate ESG policy + research
Christian Super $1,164m 25,000 Industry Adequate Position + research
Australian Ethical Retail Superannuation Fund $1,083m 26,000 Retail Adequate Position + research
MLC $81,105m 1,257,000 Retail Inadequate ESG policy
QSuper $66,126m 559,000 Public sector Inadequate Blog
ESSSuper $24,554m 137,000 Public sector Inadequate ESG policy
GESB $22,149m 290,000 Public sector Inadequate ESG policy
HOSTPlus $20,351m 1,021,000 Industry Inadequate ESG policy
Care Super $14,271m 249,000 Industry Inadequate ESG policy
MTAA Super $9,446m 249,000 Industry Inadequate ESG policy
equipsuper $7,635m 48,000 Industry Inadequate ESG policy
ACSRF $7,393m 94,000 Industry Inadequate ESG policy
NGS Super $7,307m 99,000 Industry Inadequate ESG policy
Statewide Super $6,670m 171,000 Industry Inadequate ESG policy
Energy Super $6,295m 48,000 Industry Inadequate ESG policy
Perpetual $5,321m 487,000 Retail Inadequate ESG policy
LUCRF $5,205m 170,000 Industry Inadequate ESG policy
Maritime Super $4,876m 28,000 Industry Inadequate ESG policy
Media Super $4,580m 93,000 Industry Inadequate Paris Pledge
NAB Group Super $4,365m 38,000 Retail Inadequate ESG policy
BHP Billiton Super $3,478m 21,000 Retail Inadequate ESG policy
legaluper $2,905m 44,000 Industry Inadequate ESG policy
REI Super $1,369m 30,000 Industry Inadequate IGCC member + Paris Pledge
Virgin Superannuation $549m 20,000 Retail Inadequate ESG policy
Nationwide Superannuation Fund $543m 43,000 Industry Inadequate ESG policy
Colonial First State $86,987m 2,195,000 Retail No disclosure NA
REST $41,522m 1,960,000 Industry No disclosure NA
ANZ $40,568m 1,041,000 Retail No disclosure NA
IOOF $24,455m 425,000 Retail No disclosure NA
Super SA $21,693m 210,000 Public sector No disclosure NA
Telstra Super $18,069m 102,000 Corporate No disclosure NA
Macquarie $15,972m 92,000 Retail No disclosure NA
CommBank Group Super $10,197m 75,000 Corporate No disclosure NA
Mine Wealth and Wellbeing $10,025m 70,000 Industry No disclosure NA
LGIAsuper $9,952m 84,000 Public sector No disclosure NA
PostSuper $7,605m 37,000 Public sector No disclosure NA
Qantas Super $7,271m 32,000 Corporate No disclosure NA
Suncorp $6.855m 231,000 Retail No disclosure NA
Westpac $6,214m 282,000 Retail No disclosure NA
Rio Tinto Staff Super $5,306m 30,000 Corporate No disclosure NA
Energy Industries Super $5,067m 22,000 Public sector No disclosure NA
TWU Super $4,452m 122,000 Industry No disclosure NA
Netwealth Superannuation $4,419m 30,000 Retail No disclosure NA
Prime Super $4,205m 122,000 Industry No disclosure NA
ANZ Staff Super $3,879m 32,000 Corporate No disclosure NA
BUSSQ $3,803m 85,000 Industry No disclosure NA
Tasplan Superannuation Fund $3,578m 109,000 Public sector No disclosure NA
Kinetic Super $3,272m 277,000 Industry No disclosure NA
AON $3,113m 74,000 Retail No disclosure NA
WASuper $2,627m 41,000 Public sector No disclosure NA
Club Plus Superannuation Scheme $2,465m 91,000 Industry No disclosure NA
First Super $2,431m 64,000 Industry No disclosure NA
Austsafe Superannuation Fund $2,091m 134,000 Industry No disclosure NA
AvSuper Fund $2,059m 7,000 Public sector No disclosure NA
ING Direct Superannuation Fund $2,029m 50,000 Retail No disclosure NA
Intrust Super Fund $2,015m 121,000 Industry No disclosure NA
Alcoa of Australia Retirement Plan $1,999m 6,000 Corporate No disclosure NA
Australian Meat Industry Superannuation Trust $1,893m 67,000 Industry No disclosure NA
The Executive Superannuation Trust $1,867m 43,000 Retail No disclosure NA
IAG & NRMA Superannuation Plan $1,806m 16,000 Corporate No disclosure NA
ClearView Retirement Plan $1,693m 23,000 Retail No disclosure NA
HUB24 Super Fund $1,684m 10,000 Retail No disclosure NA
TAL Superannuation and Insurance Fund $1,545m 96,000 Retail No disclosure NA
Guild Retirement Fund $1,344m 75,000 Retail No disclosure NA
QIEC Super $1,268m 26,000 Industry No disclosure NA
Zurich Master Superannuation Fund $1,183m 40,000 Retail No disclosure NA
Mercy Super $1,019m 13,000 Corporate No disclosure NA
Fiducian Superannuation Fund $985m 5,000 Retail No disclosure NA
Challenger Retirement Fund $939m 5,000 Retail No disclosure NA
Toyota Super $878m 6,000 Corporate No disclosure NA
The Bendigo Superannuation Plan $846m 19,000 Retail No disclosure NA
Combined Super Fund $783m 9,000 Industry No disclosure NA
Meat Industry Employees Superannuation Fund $740m 24,000 Industry No disclosure NA
Holden Employees Superannuation Fund $693m 4,000 Corporate No disclosure NA
Boc Gases Superannuation Fund $660m 4,000 Corporate No disclosure NA
The Victorian Independent Schools Superannuation Fund $644m 9,000 Industry No disclosure NA
NESS Super $626m 15,000 Industry No disclosure NA
Mars Australia Retirement Plan $598m 2,000 Corporate No disclosure NA
Fire and Emergency Services Superannuation Fund $585m 2,000 Public sector No disclosure NA
IRIS Superannuation Fund $518m 3,000 Retail No disclosure NA
Club Super $494m 28,000 Industry No disclosure NA
Lutheran Super $472m 7,000 Corporate No disclosure NA
AMG Super $472m 7,000 Retail No disclosure NA
Concept One The Industry Superannuation Fund $466m 31,000 Industry No disclosure NA
Goldman Sachs & JBWere Superannuation Fund $435m 2,000 Corporate No disclosure NA

Click to view the PDF version of the complete funds table
*Sourced from APRA. Correct at 30 June 2016.
(AMP) Includes fund RSEs: AMP Superannuation Ltd, N.M. Superannuation Pty Ltd
(Colonial First State) Includes fund RSEs: Avanteos Investments Ltd, Colonial First State Investments Ltd, Colonial Mutual Superannuation Pty Ltd
(MLC) Includes fund RSEs: MLC Nominees Pty Ltd, Nulis Nominees (Australia) Ltd, PFS Nominees Pty Ltd
(BTFG) Includes fund RSEs: BT Funds Management Ltd, BT Funds Management No.2 Ltd
(ANZ) Includes fund RSEs: Oasis Fund Management Ltd, OnePath Custodians Pty Ltd