Super funds face climate change risks

CLIMATE change poses one of the greatest long-term risks for super funds, an industry conference has been told.

Money tree

Super funds face climate change risks

CLIMATE change poses one of the greatest long-term risks for superannuation funds, an industry conference has been told.

New research on the potential impact of an emissions trading scheme on super funds suggests funds that employ carbon-efficient investment strategies could maintain returns and portfolio diversification under a trading scheme.

The study by UK-based environmental research company Trucost - measuring the carbon footprints of the equity portfolios of 14 of Australia's largest super funds - reveals a 36 per cent difference in investments between the largest and smallest.

"Super funds, as owners of Australia's major corporations, need a greater understanding of how the value of their investments many change as we move towards an emissions trading scheme by 2010,'' Australian Institute of Superannuation Trustees chief executive officer Fiona Reynolds told the Australian Superannuation Investment conference.

Super-fund members were entitled to ask what were the long-term consequences of investing in a carbon-constrained economy and what their funds are doing about it, she said.

"While it's still early days in the brave new world of carbon pricing, this research suggest that far from being a doom and gloom scenario for super funds and their members, there may be just as many investment opportunities as their are risks, particularly those funds that get on the front foot of this issue,'' Ms Reynold said.

Trucost chief executive officer Simon Thomas told the conference, in Port Douglas, North Queensland, climate change was seen increasingly as an economic, rather than ethical, issue.

"Whether or not you accept the science of climate change - which in my view is irrefutable - super funds and their investment portfolios that are better positioned with respect to this new financial cost will outperform,'' he said.

"Indeed this performance will occur even if climate change is, as the UK's former chancellor Nigel Lawson would have it, the greatest hoax the world has ever seen.''

There would be winners and losers when a price for carbon was established, Mr Thomas said.

"The winners will be those companies which are more carbon or energy efficient and the funds that are overweight in them.''

The report - Carbon Counts 2008: The Footprints of Australian Superannuation Investment Managers - says that applying a carbon price of $20 a tonne would cost $119 million, about 0.7 per cent of total revenue of the portfolios analysed.