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John Durie

With Ian Silk stepping down from AustralianSuper, industry loses elder statesman

John Durie
Outgoing AustralianSuper chief Ian Silk is widely respected in the industry. Picture: Ian Currie.
Outgoing AustralianSuper chief Ian Silk is widely respected in the industry. Picture: Ian Currie.

The Australian financial services industry has lost one its greats, with Ian Silk’s imminent retirement from AustralianSuper, marking the end of an era.

Along with Mark Delaney and replacement Paul Schroder, he helped build AustralianSuper from a fund employing 80 people with $21bn under management in 2006 to 1000 staff, $235bn under management and offices on three continents.

The increase over the past 15 years has transformed the financial landscape in Australia, helping to put superannuation funds at the centre of wealth creation while pushing banks aside, with a growing role in the management of corporate Australia.

So much so that ACCC boss Rod Sims has warned he is watching the funds’ impact on competition because of their growing control of consolidated industry sectors.

AustralianSuper board member Innes Willox described Silk as a “leading intellectual force in the industry, highly ethical and a consensus builder”.

Rival John Pearce at Unisuper said: “Ian has the utmost respect around the industry as a genuine leader who has built the fund with a clear strategy and strong management.”

Former Cbus boss David Atkins said: “Ian is the complete package, a great communicator, strategic thinker and the elder statesman of the industry.”

“Ian has the ability to cut through complex issues and explain them simply, based on logic, in a way which overrides any ideology,” he added.

Silk has set the organisation up for a powerful future, on route to $500bn in management in five years, with an absolute advantage over rival funds in efficiencies and costs.

Silk will be replaced by Schroder, who is an AustralianSuper veteran. He came to the fund 14 years ago from his role as national secretary of the Financial Services Union.

Schroder is well schooled in the ethos around members after starting his career with the ACTU as rehab officer, together with CBus’s Atkins who was then compensation officer.

Atkins started in superannuation under the late Paul Costello, who ran AustralianSuper predecessor ARF before becoming the first head of the Future Fund.

Present Cbus boss Justin Arter, who started last year, praised Silk’s absolute integrity and willingness to help others.

Former ACTU secretary Bill Kelty and former RBA boss Bernie Fraser were on the boards at ARF and STA, which merged in 2016 to form AustralianSuper.

Together with investment boss Mark Delaney, Silk has proved the naysayers wrong by showing big funds can deliver superior performance, as shown by his last annual return of just under 20 per cent – a record.

The performance is based in part on running portfolios in-house instead of paying external managers.

They are paid well for their roles, with Silk last year earning $1.1m and Delaney $1.7m, which is below what peers in the retail sector earn. The rule of thumb says it’s best to leave while they are still cheering and that is what Silk has done.

As a youthful 64-year-old he still has plenty to offer and it would not be surprising to see the former forklift driver and Victorian public servant back in the game after a break.

His influence has extended well past industry funds and superannuation right to the boardrooms of corporate Australia. This performance was built on doing the simple things well, producing record returns for members.

He has proved size is no barrier to performance and has done so in a political environment that at times has been hostile to industry funds.

This year, when the government left the superannuation guarantee untouched on its path from 9.5 to 10 per cent, it was a tacit recognition of his success.

Government policy is to drive industry consolidation, and the reality is the battle between retail and industry funds is long over with industry funds dominating the landscape.

They have turned their sights to corporate loans and becoming trusted supporters for corporate Australia, usurping banks as the financial lifeblood of the economy.

In a sometimes highly ideological debate, Silk has won, based on simple performance delivering for members.

His one blemish, in some eyes, is his choice of the Hawthorn football club, but with Schroder taking over Australian Super will now be a Collingwood stronghold.

Carbon shortage

Australia faces a chronic shortage of carbon projects, with greenhouse emissions totalling 328 million tonnes from the 415 companies registered and registered carbon credits having the capacity to match just 1 per cent of emissions.

This explains why companies like Telstra go to countries like India to build up some 2 million tonnes in offsets to match its 1.3 million tonnes of scope one and two emissions.

Telstra’s environment boss Tom Penny is keen to have Australian markets integrated with global markets to help boost demand and supply.

Telstra is now one year into being net carbon neutral thanks to its offset program but has a goal to reduce its own emissions by 50 per cent by 2030.

The offset programs are ­sourced on the advice of Raphael Wood’s Market Advisory Group. Penny said the company was also increasingly working with suppliers like Cisco, Ericsson, Samsung and Apple to reduce their emissions.

This progress comes as EY partner Emma Herd warns: “Australia is doing better on quality disclosures than the global average, yet still, this isn’t enough.”

She notes that “only 41 per cent are conducting scenario analysis, and only 15 per cent feature climate change in their financial statements”.

Herd, who works on climate change and sustainability, notes “new legal opinion that superannuation funds must divest from assets with a high degree of climate risk or face breaching their members’ best interests duties”.

“Capital is tipped to move from industries involved in producing fossil fuels and those with energy-intensive business models to suppliers and producers of clean technology innovation, low-carbon solutions, alternative energy sources, low-emissions products and services, and technologies, such as 5G, that are expected to play an important role in decarbonising energy, transport and manufacturing,” she said.

Telstra’s Penny said its emission reduction program was a whole-of-company initiative with monthly governance meetings co-ordinating a range of projects from 10,000 sites with solar panels, upgrading and replacing air conditioners, more efficient lighting and optimising cool weather sites.

The company, which consumes 1 per cent of Australian electricity, already has three power purchase agreements for renewable energy, plans more and when it starts selling Telstra energy shortly it will be carbon neutral. It is also working on better carbon disclosure to integrate it into financial results to increase transparency.

John Durie
John DurieColumnist

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Original URL: https://www.theaustralian.com.au/business/financial-services/with-ian-silk-stepping-down-from-australiansuper-industry-loses-elder-statesman/news-story/df0a825b9870d4c3d921df6c087c0c3e