The Australian’s 2022 CEO Survey: Aware Super’s Deanne Stewart

Aware Super CEO Deanne Stewart discusses inflation, IR, energy – and much else besides in her responses to The Australian’s 2022 CEO survey.

Aware Super is working with staff on the best work-from-home/office arrangements.

Aware Super CEO Deanne Stewart discusses inflation, IR, energy – and much else besides in her responses to The Australian’s 2022 CEO survey.

How are inflation and interest rates affecting your business and customers? Does it change your approach to capital management?

From servicing over 1.1 million members we have a deep understanding of the increased levels of financial stress many are facing, and the daily struggles they’re grappling with in a news cycle dominated by cost of living pressures, nervousness about volatile economies and disrupted supply chains. It’s in the headlines every day – from the community surf club paying an extra $250,000 a year for its electricity, or the families living in their cars due to the housing shortage.

And more than just expressing empathy, we’re committed to actively helping Australians plan and take action to help ensure their best possible retirement — especially when an estimated 3.6 million Australians will be retiring in a decade and in a future they didn’t envision. During these times Australians from all walks of life need strong, trustworthy guidance and advice. We know it’s hard to make extra contributions to your super when things aren’t going to plan – but advice can provide that alternative plan, identify future needs and discover what the trade-offs are.

When we analysed over 100,000 members we found those receiving financial advice had about 22 per cent more funds in their super account – almost $150,000 in their retirement savings. The advised members also reported greater confidence about their financial future, felt they had more retirement options and were feeling more informed about their finances. It’s this confidence that will also help empower them to navigate through this uncertainty, both today and for the future.

Superannuation, by its very nature, is the long-term allocation of patient capital. We know not to react in a kneejerk manner to market volatility and it’s what we advise our members. They need to hold their nerve and, if their circumstances haven’t changed, stay the course with their investment option.

Our investment teams are practising what we preach. As institutional investors, we’ve maintained our discipline through these periods as, historically, they’ve presented good buying opportunities and ways we can add value to the portfolio for our members over the long term.

Because we’re also a large superannuation fund, and active managers, we can invest in unlisted, real assets that smaller investors or retail funds just can’t access, like infrastructure and property – as well as actively managing fixed income to enable us to dampen the impacts of higher inflation and interest rates. These can have a real diversifying effect and we’ve seen that play out through cycles over the long term.

Where do you see risk now for Australian business – eg energy, supply chain, cyber? What does the country need to do to attract investment?

Deglobalisation, our relationship with our major trading partner, China, the war in Ukraine, changing energy transition supply and demand dynamics, sophisticated cyber attacks, digitalisation and the tech evolution: these are all significant risks for Australian businesses. But we also see them as an opportunities to source new sources of risk-adjusted returns.

And being an institutional investor in Australia means we could not be better placed. The world needs a lot of energy transition commodities – which we have in spades – and in a world of uncertainty and rising hostilities, we’re renowned as being a friendly trading partner. As a country, we can also pride ourselves on being very efficient in extracting our resources and sending them out to the world’s supply chains.

Aware Super chief executive Deanne Stewart.

But we’re more than just a big mine: we are also a hotbed of innovation, especially when it comes to energy transition technologies. In late November, a platform in which we are a cornerstone investor, North Harbour Clean Energy, signed a deal with CellCube, a global leader for Vanadium Redox Flow Batteries (VRFB), to develop Australia’s largest VRFB assembly and manufacturing line in eastern Australia to supply 24/7 green power and long-duration energy storage in the National Electricity Market. It’s remarkable, and it’s a showcase of how we’re adapting to look for those new opportunities to deliver strong returns for our members’ retirement futures. The tech underpinning this was made in the hallways of the University of NSW by Maria Skyllas-Kazacos, and has gone on to attract investment and interest globally.

The nation’s housing story is also a looming risk – one which Australian and overseas policymakers and investors are also keeping a close eye on. In addition to addressing the broader housing affordability crisis, we’d also like to see a specific focus on the lack of housing in regional areas, and action to address the growing levels of homelessness among older women. In this challenging environment, we’re diversifying our portfolio through investments in new areas such as build-to-rent. We’re the largest investor in affordable housing in this country, with $1.5bn already committed and a goal to add 1700 affordable homes into our communities by 2025. This opportunity is helping us achieve our objective of delivering strong, risk-adjusted returns for our 1.1 million members.

How is energy transition affecting you? What needs to happen here?

The spectre of global warming and current energy transition pathways requires resilience from all stakeholders. From households paying rising energy bills from already overstretched budgets to communities currently battling floods, droughts, fires or cyclones, or organisations grappling with meeting carbon emission and biodiversity targets, and governments and policymakers trying to keep up to date with latest scientific findings.

As institutional investors, climate change is a double-edged sword. It, along with other ESG factors, presents some of the biggest long-term threats to the investment returns we manage on behalf of more than 4 per cent of the national population.

But it also provides some excellent emerging opportunities in the form of new sources of risk-adjusted returns.

The ability of our investments to help transition our national electricity grid to unlock renewables and decrease energy prices is just the icing on the cake. Their real value lies in unlocking new sources of strong returns through diversification into new asset classes.

This is critical as we, along with other institutional investors around the world, are investigating new avenues of growth with strong defensive qualities to meet our long-term investment objectives in a disrupted economic environment.

Through our climate change portfolio transition plan we have recommendations and targets designed to develop a decarbonisation pathway for our portfolio to achieve net zero emissions by 2050, and an economy-wide 45 per cent reduction in emissions by 2030.

Currently, we have more than $1bn invested in renewable energy. And our investments in the Snowtown II wind farm in South Australia, in North Harbour Clean Energy and in Tilt Renewables – which already has eight operational solar and wind farms – are excellent examples of how investors like us are already supporting this transition to renewables and storage. We are especially excited about the development of longer-duration storage, providing firming capacity to support the transition to a grid powered by ­renewables.

The combination of technological innovation with institutional capital has been supercharged by recent renewed policy certainty. The Powering Australia Plan, which builds on previous Rewiring the Nation commitments, is giving us and other institutional investors the green light to pursue these compelling new sources of strong risk-adjusted returns.

Productivity growth is pitched at a low 1.2 per cent. What needs to happen to lift productivity? What should a reform agenda prioritise?

There is a long list of priorities from the Productivty Commission, which has recently released its interim report into its five-year productivity inquiry. Starting to act on any of those priorities would be a start.

Has your business adapted to labour shortages? Do you see IR changes, including industry-wide bargaining, as progress? Has your thinking on working from home changed in 12 months?

Post-pandemic, when lockdowns have structurally altered working practices, businesses across the country are rethinking their business environment and culture.

This will involve balancing the needs of staff members who have changed their working practices; the needs of teams and whether they can foster adequate collaboration and creative processes; and the needs of an organisation in marshalling its employees’ social capital and directing it towards meeting business objectives.

Read more: The Australian 2022 CEO Survey

Flexibility has long been a core part of our employee proposition and we’ve learned that people feel engaged in and aligned to an organisation if they are capable of working productively from anywhere, when they are able to. They are also more productive after being empowered and trusted to work out what works for them, rather than being dictated to from head office. Where a role in our team can be performed from home, we will be encouraging our people to consider how they want to incorporate working from home in their usual working rhythm. We’re also working through – with our people – the role of “the office” and creating strong attractors for our people to come into the workplace to ensure we don’t lose the power of social connection and can protect our member-centric culture.

Will the government’s changes on childcare and paid parental leave move the dial on workforce participation and productivity?

It is important that we remove as many barriers as possible and instead actively create opportunities for workforce participation, to drive a sustainable economic recovery and boost productivity.

Any solution should also be in tune with the working lives of women, not just when they have children. For instance, when women first enter the workforce there should be policies in place to enshrine equal pay for equal jobs. The 168-year wait Australian women face until they achieve equal pay will create a cumulative $684bn deficit in superannuation guarantee contributions over that period. It’s not only inherently unfair, it’s not a driver of productivity.

And when women leave the workforce to have children, it’s a time when paid parental leave and a super guarantee on both paid and unpaid parental leave can help to close the gap.

When women return to work, affordable and accessible childcare is key to allowing full participation in the workforce – and improving both pay and superannuation equity – while also fuelling a more productive society.

In modern Australia, there is now more sharing in caring responsibilities, with an increasing number of men staying home to care for children and allowing women access to earn more wages and continue contributing to their retirement security through super. It’s a move in the right direction.

We also applaud, in the loudest possible terms, the extension of paid parental leave to 26 weeks by 2026 and have called on the private sector to also step up with stronger parental leave policies.

We continue to call for the government to commit to paying the superannuation guarantee on paid parental leave and we look forward to working closely with all stakeholders to make this a reality for Australian families.