Where superannuation funds sit in Australia’s new net-zero era
The Labor Party’s recent election victory means Australia’s government will bring in greater support for net-zero targets, but what does this mean for the country’s A$3.5trn superannuation fund sector?
In May, Australia voted in its 31st prime minister – Anthony Albanese of the country’s Labor Party. He defeated the sitting conservative coalition with a sweeping majority and has made climate change a core focus of his manifesto. This has included a pledge to invest A$76bn in renewable energy, create 604,000 jobs, and overall to reduce Australia’s emissions by 43% before 2030.
Australia’s population of over 26 million people has spoken, but this now poses questions for Australia’s superannuation fund industry. At over A$3.5trn in size, this sector has significant influence, with some funds already considering how net zero could change as a priority.
Australian Ethical is a A$6.5bn superannuation fund which, as the name suggests, already has a net-zero objective. A spokesperson for the fund said it was too early to tell exactly what prime minister Albanese and his new majority will mean for net-zero policies, but they saw the outcome as “very encouraging” for combatting climate change.
“We’ve seen the major party with the more ambitious climate strategy get up, but we’ve also seen unprecedented numbers of independents focused on climate action, so we can be optimistic that the pace of change is going to escalate, and that the country has given a clear mandate for more action. Already, the scope of action we see available to us has increased,” explains the spokesperson.
They are not alone. UniSuper, a A$110bn superannuation fund, is proceeding with net-zero targets regardless but a spokesperson says greater support from the government would be welcome.
“As it stands, it is still too early to see how the new government will impact climate action in Australia. However, given that the [Labor Party] has campaigned on a climate action platform, we are hopeful that further incentives will be afforded to companies which are actively engaging in decarbonisation and shifts towards sustainable industry,” explains the spokesperson.
“The change in government does not change our approach – UniSuper is committed to building a future worth retiring in that doesn’t cost the planet.”
As the new government settles in there will be numerous priorities to see to, not just net zero. However, the overall change of tone is enough to start driving change according to some – largely due to the pivot in sentiment this represents.
It seems it will be a more favourable environment. It’s not just the federal election result, but when we look at the AGL demerger being blocked – this sort of action pre-election faced a hostile environment.
Hostile legacy
Brynn O’Brien, executive director of the Australasian Centre for Corporate Responsibility (ACCR), points to the policy environment now switching to a “favourable” one from a “hostile” legacy.
“It seems it will be a more favourable environment,” says O’Brien. “It’s not just the federal election result, but when we look at the AGL demerger being blocked – this sort of action pre-election faced a hostile environment. For context, we have had prime ministers actively saying companies should keep coal.”
AGL Energy, an Australian energy giant, had planned to separate its coal-powered plant unit from its electricity business, but was defeated by billionaire climate activist Mike Cannon-Brookes. This was due to accusations it was out of step with goals under the Paris Agreement. Now, the ACCR hopes for more progress to follow in a similar vein.
“The former government was deeply hostile to concerted vote actions,” says O’Brien. “That has had a chilling effect on actions taken by Australian institutional investors over the past decade. That environment is over and is now more favourable.
“There is a real role for asset owners and managers that control listed stocks to be involved and make it clear there is no room for new fossil fuels anymore.”
There are already signs of this and Australian Ethical is seeing greater support from an engagement perspective. Their spokesperson explains: “It’s early days yet, but already within investor groups, we’re seeing the ambition of our engagement with government (as well as industry) ratchet up and refocus on reaching net zero.
“We’d like to see a price on carbon in Australia, as an efficient tool for reducing emissions in the most cost-effective way, and those kinds of policy options come back onto the table for government engagement with a more ambitious climate agenda.”
