Australia's Superfunds Embrace New Carbon-Pricing Scheme

(July 12, 2011) — Australia’s superannuation funds believe that the Gillard Government’s new carbon-pricing scheme will result in greater investment in clean energy and clean technology.

“The biggest risk in investing is uncertainty,” said Australian Institute of Superannuation Trustees (AIST) CEO Fiona Reynolds. “Moving to a carbon price reduces this risk and means super funds – as long-term investors – can now start to properly manage climate change without having to speculate on the price of carbon pollution.”

Reynolds noted that the three-year transition period during which the Government would set the carbon price would provide businesses and funds the necessary time to prepare for market-based pricing of emissions. According to Reynolds, Australiaʼs $1.4 trillion super industry has had a significant allocation in their investment portfolios to climate-sensitive assets and are keenly aware of long-term climate risks to asset valuations.

However, a recent study by the AIST/Climate Institute of 18 of Australiaʼs largest super funds revealed that more than three quarters of the funds identified lack of certainty around climate policy (domestic and/or international) as a barrier to them acting collectively to fund clean energy and clean technology investments or portfolios.

Another study revealing a barrier to investment in clean energy and clean technology is a June report by Colonial First State Global Asset Management in Australia, which warned that the short-term nature and focus of financial markets is inhibiting consideration of environmental, social and governance (ESG) issues in capital allocation and could be detrimentally impacting long-term company and investment performance.

In its fourth annual Responsible Investment Report, Australia-based First State, known as CFSGAM, said that long-term, investment performance could be harmed if ESG factors are ignored. “As a fiduciary it is our responsibility to make the best possible investment decisions on behalf of our clients,” First State CEO Mark Lazberger stated. “Critical to that process is appropriate consideration of environmental, social and governance issues as these factors significantly impact long-term company performance.”

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