Super funds lagging on direct renewables investment
Australia’s superannuation industry is underinvested in when it comes to the country’s transition to renewable energy, an environmental advocacy group claims.
According to the Market Forces report, the top 30 superfunds have directly contributed $771 million of the $99 billion invested in Australian clean energy projects since 2020; This amounts to roughly 0.03 percent of the $2.5 trillion in retirement savings managed by these funds.
Domestic and foreign commercial banks provided more than half of the cash flow to Australian renewable projects; followed by developers and operators, government agencies and public authorities.
Brett Morgan, author of the report and head of campaigns at Market Forces Australia, said Canadian superannuation funds invested $408 million more directly in Australian renewable energy projects than the 30 largest funds over the period.
“Super funds are missing a critical opportunity to deliver clean energy infrastructure that will power the Australian economy for generations,” Mr Morgan told AAP.
“Any superfund supporting the Paris Agreement’s climate goals should significantly increase policy advocacy efforts to eliminate barriers to scaling investments in clean energy.”
Six of the top 30 super funds had direct investments in Australian renewable energy or battery storage projects: Aware Super, Cbus, HESTA, NGS Super, Prime Super and Rest.
However, all but one of the other 24 funds were invested in green projects indirectly, possibly through external asset managers or infrastructure funds, although confidentiality agreements put the true figure beyond the reach of the report.
“Public policy reform will be needed to mandate the more detailed disclosure of Australian renewable energy investments that members have been demanding to see,” Mr Morgan said.
The indirect figure was probably significant; pooled or managed funds accounted for almost half of the $3.1 trillion allocation in funds regulated by the Australian Prudential Regulation Authority.
Australia’s total superannuation sector is worth $4.4 trillion, including self-managed funds and public sector superannuation assets. APRA figures to show.
Association of Australian Superannuation Funds chief executive Mary Delahunty said the lack of indirect assets was a significant gap in the report.
“Australia has a deep and unique ability to provide patient capital for infrastructure projects, including those that will contribute to the energy transition,” Ms Delahunty said in a statement.
He added that super funds are legally required to invest in the best financial interests of their members and are subject to performance tests against criteria specifically drawn up by APRA.
“The vast majority of funds have exposure to energy assets, indicating that the asset class has potential opportunities for members,” Ms Delahunty said.
“If funds have not participated in certain investment opportunities, it is likely because those opportunities did not meet appropriate risk-adjusted return requirements.”
The federal government is consulting on the redesign of the performance test following its implementation in 2021, with applications closing on Friday, June 19.
Critics have argued that the test encourages “index hugging,” which directs investment away from innovation and growth into safe, established companies or index funds.
Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
