Sunsuper is a Queensland-based industry super fund, with over 1.1 million members and around $40 billion of assets under management. Our recent Risky Business report shows how, when it comes to disclosing climate risk, there is still plenty of room for improvement.
Sunsuper’s Environmental, Social and Governance (ESG) Policy, released in April 2017 states: “material portfolio risks and opportunities relating to climate change are considered from an investment perspective.”
This recognition and understanding of the financial risks climate change poses to the fund’s investments is an important first step. But the devil is in the detail, and the real question is HOW are these considerations being incorporated into trustee’s decision-making processes?
Tell Sunsuper to improve its climate risk disclosure today!
Some other Australian funds have committed to steps such as measuring and disclosing the carbon emissions of their investment portfolio, ensuring climate change risks are analysed as part of due diligence procedures for new investments, and even excluding investments in companies with significant coal and oil tar sands operations. But Sunsuper’s approach to climate change risk doesn’t seem to have progressed far past the initial step of recognition and the vague reassurance of ‘consideration.’
A recent legal opinion noted: “Trustee directors should source, consider and weigh relevant information relating to climate change risk and record their decision making processes, including any considerations of climate change risks.”
If climate risk considerations are indeed taking place amongst Sunsuper’s trustees, clearly the content and outcomes of those considerations should be recorded. This information should be communicated to members so they can be confident climate change risks to their portfolios are being dealt with appropriately.
What is Sunsuper invested in?
The holdings within Sunsuper’s Balanced and Growth options are largely undisclosed, however we know they include investments in large diversified fossil fuel companies BHP, Rio Tinto, and Wesfarmers.
The fund’s Ethical, Environmental and Socially Responsible Investments option discloses all its holdings, so we know that it has around 3.2% invested in fossil fuel companies, including Oil Search, Origin Energy and Santos, and 12.5% invested in diversified fossil fuel companies.
Sunsuper’s largest infrastructure investments include gas and electricity distribution networks. According to the Task Force on Climate-related Financial Disclosures (TCFD), these types of assets will face transition risks as renewables and batteries develop. The TCFD has also warned that infrastructure and property assets are exposed to physical risks due to extreme weather events, the intensity of which are increasing as a result of climate change.
Sunsuper’s trustees should be gathering information about the potential risks and opportunities posed by climate change to all asset classes, and using that information to make informed investment decisions on behalf of their members. These considerations should be recorded and disclosed to members. The fund should also be proactively working to understand and disclose its exposure to climate risk, for example by regularly measuring and reporting on its exposure to carbon-intensive assets, and committing to reduce exposure over time.