Industry super wants clearer rules to unleash investment

The sector is pressuring the Albanese government to make changes, and in a new paper lays out the case for more unlisted infrastructure investments.

The $1 trillion industry super fund movement is called on the federal government to develop a national strategy to reduce Australia’s carbon emissions.

In a paper to be released on Tuesday, the sector’s peak body – Industry Super Australia – wrote that funds were looking to make more investment in projects which will lower carbon usage but need more comprehensive policies around sectors such as renewable energy.

“The opportunities for further investment to decarbonise Australia’s economy are immense and are set to grow with most industry funds looking to invest in this sector over the next five years,” the paper reads.

“However, without a clear national strategy and government policy to invest in the energy transition, opportunities to invest in Australia will continue to be constrained.”

“Greater policy stability around renewables, carbon reduction targets, innovation and other policies would help funds to further invest in decarbonising Australia’s economy.”

The organisation’s chief executive, Bernie Dean, said the sector wanted the government to remove barriers to institutional investment in projects that helped decarbonise the economy.

The Albanese government has promised that it will reduce carbon emissions by 43 per cent by 2030, a more aggressive step on the road to net zero by 2050 than the Morrison government.

But industry and investors, including the cashed-up super sector, are looking for more detailed government policies on how it plans to deliver on its promises.

The ISA report notes that the OECD delivered a “scathing assessment” of Australia’s climate change policies late last year, “warning that the pace of decarbonisation efforts would have to massively accelerate if our country is to meet even its baseline targets”.

It also notes that the Clean Energy Council has warned that continued uncertainty was hampering decarbonisation efforts, particularly around large-scale renewable energy projects.

The report argues that industry super funds are ideally placed to invest in long-term unlisted local assets including those which would be part of a decarbonisation policy.

The funds have some $100bn in unlisted assets in Australia.

Hostplus has partnered with the Clean Energy Finance Corporation and Octopus Australia to develop a renewable energy generation project in Victoria to help replace the Yallourn coal fired power station which is scheduled for closure in 2028.

Other examples include investments in wind farms at Warradarge and Albany and solar farms at Greenough River in Western Australia by Cbus. Industry super fund vehicle IFM Investors also having significant funds in renewable assets through its infrastructure debt team.

The report also calls on the government to consider ways that funds can participate in nation building projects, particularly through private equity and unlisted assets.

It calls on the government to nominate “strategic industries of the future” and create more efficient, sector-based incentives to encourage the flow of capital to them.

The paper – which comes at a time when some critics have questioned whether the extensive unlisted assets held by industry super funds are accurately valued – argues that the sector’s investments in those assets give its funds an investment return edge.

“Industry super funds’ $100bn in unlisted assets not only provides excellent investment returns to members, but they also create jobs, increase productivity and fuel economic growth,” the report reads. “Industry funds have greater exposure to unlisted assets such as property, infrastructure and equities than retail funds.”

It says the higher exposure to unlisted assets means that a 40 year old member would have been more than $11,000 better off over the past 10 years, giving them an extra $137,000 at their retirement. The report says industry super funds currently hold investments in projects which are helping to abate 3.6 million tonnes of carbon annually with developments in place which will take this to 14.2 million a year by 2030.

The report, which seeks to detail the broad range of investment by industry funds in areas from agriculture to manufacturing and start-ups to debt financing, is part of a campaign by the sector to show its support as a long term supplier of capital for local industry.

But the sector is also pushing the government for more policy stability, including legislation protecting it from any new policies for early access to superannuation, such as the Morrison governments’ early access scheme in 2020 and the proposal to make superannuation available for first home buyers put forward by the Morrison government before the election.

“Protecting, rather than trashing the fundamentals of the super system is the key to leveraging the power of our investment capacity to do good and strengthen our economy,” Mr Dean said.