Climate change: Implications for superannuation funds in Australia

January 2016 – New study from our Master of Studies in Sustainability Leadership, supported by asset manager Colonial First State Global Asset Management, highlights member interest in superannuation fund climate exposure.

Download the working paper.
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Authors

Lorna Tweedie, Executive Manager Colonial First State Global Asset Management and Dr Jake Reynolds, Director, Sustainable Economy, University of Cambridge Institute for Sustainability Leadership (CISL)

Publication date

January 2016

Abstract

A number of recent and authoritative studies have indicated that Australian superannuation funds are highly exposed to a range of climate sensitive assets and that the long-term value of these assets may be significantly and negatively impacted.

The latest study from the Master's programme of the Cambridge Institute for Sustainability Leadership, and supported by asset manager Colonial First State Global Asset Management, looked at superannuation fund member’s interest and awareness of climate risk.

The research, conducted in the summer of 2015 and prior to COP21 in Paris, polled members of a large Australian corporate superannuation fund to understand their attitudes towards climate risk and investments in fossil fuels whether they had taken any action as a consequence.

Key findings

  • 48 per cent were concerned that their pension fund may be contributing to climate change through investment in fossil fuel companies.
  • 55 per cent were concerned that the financial performance of their fund will be negatively impacted by climate change.
  • A mere 3 per cent of members had moved funds away from climate sensitive investments even though 61 per cent would like their superannuation fund to reduce investments in fossil fuel companies and 75 per cent would consider moving all or part of their pension to a low carbon or clean energy fund.
  • The research points to Australia’s major superannuation schemes facing increasing demands for simple, easy to understand information on the climate risks that beneficiaries’ pension savings are exposed, and to increase the “climate friendly” investments that schemes have invested in on members’ behalf.

Citation

Tweedie, L. and Reynolds, J. (2016), 'Climate change: Implications for superannuation funds in Australia', University of Cambridge Institute for Sustainability Leadership (CISL), Working Paper 01/2016