Super funds broaden climate risk assessment

Superannuation funds are increasingly assessing climate change risks to a broad set of asset classes, according to a report from the North American Investor Network on Climate Risk and the Australia/New Zealand Investor Group on Climate Change.

The survey - which looked at global investor climate change practices - found that while the focus on equities was still strong, 57 per cent of super funds formally or informally assessed the climate change risk to other asset classes and 31 per cent tried to quantify it in some way. 

Although engagement efforts focused mainly on companies with listed equity portfolios, 29 per cent of super funds and 21 per cent of asset owners undertook corporate climate change engagement in relation to corporate bonds, 37 per cent of managers and 29 per cent of super funds to equity, 18 per cent of managers and 24 per cent of super funds to private equity, and 18 per cent of managers and 24 per cent of super funds to infrastructure.

Superannuation funds were more likely to pool resources and assets to influence investee companies, with 74 per cent engaging collaboratively compared to 59 per cent of asset managers.  

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Overall, 55 per cent of super funds conducted a climate risk assessment while 26 per cent of respondents made changes based on the assessment.

It said a common approach to reducing exposure to climate risk was to invest in the transition to a low carbon economy in industries such as sustainable timber and clean energy.

But while institutional investors are increasingly assessing the risks that arise from global warming, training on climate change has decreased for super funds from 45 per cent in 2010 to 41 per cent, and from 85 per cent to 82 per cent among asset managers.

And while, 43 per cent of super funds considered climate change risk when making new manager appointments, it was considered among a number of environmental and social governance issues.