Super funds preparing to walk back their commitment to climate targets

Australia’s most powerful super funds appear to be laying the groundwork to potentially back track on their climate stated targets.

Association of Superannuation Funds of Australia chief executive Mary Delahunty. Picture: Ian Currie

Australia’s most powerful super funds appear to be laying the groundwork to potentially walk back their climate targets amid a growing political and corporate backlash against ESG.

As funds come to terms with the shift in sentiment and a four-year term of the Trump presidency, the industry is now voicing its concerns on meeting climate pledges made at a time when pushback against an environmental, social and governance focus was on the fringes.

Speaking to The Australian on Tuesday, Association of Superannuation Funds of Australia chief executive Mary Delahunty said funds’ climate goals could be hampered by the anti-ESG movement, with engagement potentially less effective as corporates backtrack on the green agenda.

“Funds will continue to have an interest in meeting climate targets, and reporting on progress towards meeting those targets, but it is important to be mindful that movements against climate change mitigation can hamper those goals,” Ms Delahunty said.

“Ultimately, from the perspective of superannuation funds, investment opportunities in decarbonising assets must provide risk-adjusted returns to members. Changes in policy settings may lead to less opportunities in some markets.”

Ms Delahunty singled out policy settings in the US as a risk to funds meeting their green targets.

“In a political environment where there are conflicting messages between investors and policymakers, company engagement can unfortunately be less successful,” Ms Delahunty said.

AustralianSuper CEO Paul Schroder said his fund, the biggest in the country with $350bn in assets, was ignoring the external noise on ESG.

“We don’t get too caught up in fashions, and we don’t get too caught up in the politics of it. We just think about this: is the world going to move to net zero? Yes, it will, and that consensus means that will be where to make money,” he told Bloomberg.

“We understand there’s differences of opinion about the way things roll out, we understand from time to time it’s politically contentious, but we’ve only and always seen it through the lens of making money for members.”

AustralianSuper has a 2050 target for net zero carbon emissions in its investment portfolio (based on scope 1 and scope 2 emissions of portfolio investments) but, unlike some other funds, has no 2030 emissions target.

The fund’s annual report shows it has given itself an ‘out’ if it can’t get to net zero by 2050: “Our ability to achieve the net zero commitment is dependent on policymakers and portfolio companies making and delivering on their own net zero commitments,” its annual report states.

Australian Retirement Trust, which has pledged to reduce emissions by 2030 and be at net zero by 2050, suggested its climate targets could be adjusted “based on updated information”.

“Numerous risks, including the financial implications of climate change, form part of our risk management approach,” ART’s head of sustainable investment, Nicole Bradford, said.

“ART monitors its climate-related targets on a regular basis and any adjustments will be based on updated information we have at the time and in line with our members’ best financial interests duty.”

HESTA CEO Debby Blakey appeared to be the outlier, saying the healthcare industry super fund was committed to its climate targets. These include a 50 per cent reduction in portfolio emissions by 2030 and for the fund’s portfolio to be net zero by 2050.

“Our members’ superannuation is invested around the world so global issues like climate change impact the long-term performance of their investments. That’s why we focus on managing systemic risks like climate change to ensure we can continue delivering strong long-term returns for our members,” Ms Blakey said. “Science tells us the world needs greater action to address climate change. Accordingly, we remain committed to our climate targets, which we will continue to drive progress toward through a combination of active ownership and capital allocation.”

Originally published as Super funds preparing to walk back their commitment to climate targets