Funds need to position for climate change or lose returns

Superannuation funds that are not positioning their portfolios to address climate change are not achieving their purpose of providing strong long-term sustainable returns, according to Aware Super.

Speaking on a climate change panel, the fund’s chief executive, Deanne Stewart, said climate change was one of the biggest risks and funds needed to make sure they adjusted their portfolios accordingly if they wanted to provide sustainable long-term returns.

“It’s not to do with activism, it’s to do with getting ahead of the trend, protecting members and looking for great opportunities. What you don’t know is when things are going to happen but you know that they will so if you’re not positioning accordingly you’re putting your members at risk,” she said.

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Stewart said words and setting goals were important, but they meant little unless funds had specific actions on how they were going to achieve them.

“It started with setting 2050 net zero emissions but working back from there, within the next decade to meet the Paris agreement what do we need to do in our portfolio? Where do we think different companies are likely to move?” she said.

“We have to look at physical risk, reputational risk, and financial risk, and it impacts so many more sectors than we think. We’re talking about agriculture, health, construction, and so on.

“With our portfolio we’re looking at transitioning that over the next decade to reduce emissions by 45% and then importantly over the next three years reduce by 30% in our listed equity portfolio. We think that’s getting ahead of the trend and that will provide better opportunities and protect our members over most other funds.”

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