Morrison government tells super funds to sell Russian assets

The Morrison government now expects superannuation funds to exit their Russian assets, as financial sanctions are taken to a new level.

Treasurer Josh Frydenberg and Financial Services Minister Jane Hume. Picture: NCA NewsWire/Sarah Matray

The Morrison government has taken financial sanctions against Russia to a new level, saying it now “expects” Australian superannuation funds to divest any holdings of Russian assets.

In a joint statement, Treasurer Josh Frydenberg and Financial Services Minister Jane Hume said they welcomed the voluntary action already taken by some funds to sell their Russian assets.

“While Australian super funds only have a small exposure to Russian investments in the context of the $3.5 trillion super system, it is important that Australia sends a clear and unequivocal signal that we condemn in the strongest possible terms Russia’s unprovoked and unjustified attack on Ukraine,” the ministers said.

“The actions of Australian superannuation funds to divest of Russian assets will complement the range of sanctions imposed by the government to exert pressure on Russia, in alignment with our international partners.”

The Australian Prudential Regulation Authority confirmed in a statement it would not take any action against trustees who seek to exit Russian assets as a result of the government’s directive.

Action might otherwise have been taken against trustees if the prudential regulator believed they had not acted in the best financial interests of fund members.

The government’s move comes after the Future Fund announced on Monday it would wind down its $200m exposure to companies listed on the Moscow exchange, as some of the world’s largest funds dumped their investments in response to the invasion of Ukraine.

Some of Australia’s largest investors, including super giant AustralianSuper, have holdings in several Kremlin-connected Russian energy companies.

The country’s second-largest superannuation fund, the newly-formed Australian Retirement Trust, said it would divest some $130m assets held in Russia. The fund, which was formed with the merger of QSuper and SunSuper, manages around $230bn in retirement savings.

The nation’s sovereign wealth fund had $204bn in assets at the end of last year, with no holdings in Russian sovereign debt or other fixed income.

However, a spokesman said that the fund, which is chaired by former Howard government treasurer Peter Costello, holds about 0.1 per cent of its portfolio in listed Russian stocks.

“We will be winding down the remaining exposure, which is not currently subject to divestment sanctions, as market conditions permit,” he said. “The Future Fund has implemented all sanctions imposed by Australia, the US and the European Union to date.

“We have devoted significant resources to compliance and will continue to do so as additional sanctions are announced.”

In other moves, billionaire Fortescue Metals chairman Andrew Forrest said on Monday that the company’s renewables arm would pull back from green projects under way in Russia.

“We have been trying to work with Russia for some time. We’ve made it incredibly clear that you just have no excuse to go and invade another country,” Mr Forrest said.

The Financial Services Council said it supported the government’s expectation that super funds would divest their holdings of Russian assets.

The FSC said it would develop guidance for trustees and fund managers to meet the government’s expectations.

The industry group would help its members to implement all sanctions imposed on Russia by Australia, and put a stop on new investments.

It would also help funds to review their portfolios with a view to winding down exposures to Russian assets not currently subject to divestment sanctions, as market conditions permitted.

Finally, the FSC would ensure there were appropriate compliance resources to achieve these objectives.

“Superannuation assets are invested through different structures and with different investment strategies, including directly held assets, external mandates, actively or passively managed investments and co-mingled investment arrangements with Australian and international investors,” the FSC said.

“The FSC will work with members to help them navigate how this guidance may be implemented in each of these circumstances.”

Mr Frydenberg and Ms Hume reiterated the government’s “staunch” support for Ukraine’s sovereignty and territorial integrity.