Super funds not managing carbon will be left behind

Superannuation funds need to understand carbon productivity and efficiencies in their portfolios or they will lose the race to net zero and will be left holding companies that nobody will want.

Carbon data provider, Emmi said while some investors were ticking boxes when it came to carbon, there were sophisticated investors that were gaining the most traction as they looked to assess what their real world impact was.

Emmi founder and chief executive, Michael Lebbon, said the penny had dropped for part of the market on the issue and the dollar would drop for the rest of the market over the next couple of years.

“If you don't understand your carbon productivity and carbon efficiency of your portfolio and how you're going to manage that and control that narrative, and what your carbon risk alignment is and how that affects you against absolute and relative risk, you will lose the race to net zero,” he said.

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“You need to be active and engaged in this otherwise you will end up holding companies that have risk that you didn't realise they had and then all of a sudden, the chickens come home to roost and you've got you've got some serious problems on your hands.

“At that point everybody rushes for the exits and you’re left holding a company that nobody necessarily wants.”

Lebbon noted that there was a varying degree of sophistication on managing carbon within super funds and asset managers but that the size of the funds did not correlate to action and education.

“It'd be nice to say the bigger the fund, the more sophisticated they are but that’s not always the case. We've spoken to some very big funds who are less aware of all of this,” he said.

“We've gone into meetings thinking some of the big funds were really up the curve but actually they're a little bit further behind. So, the level really does change across asset owners and asset managers. But generally, the big ones are more sophisticated but it's not rule of thumb.”

The smaller asset owners that were up the curve on carbon management, Lebbon said were not doing it from a risk mitigation perspective but for an outperformance opportunity.

“They’re taking advantage of the outperformance whereas the big ones have extra resources and are able to put a team on it and that is where the difference is coming from,” he said.