Super funds pulled up for climate promises

Five of Australia’s largest superannuation funds could be exposing themselves to legal risk by failing to “effectively engage” with companies expanding fossil fuels, according to a new report.

The Stewards of Climate Disaster report by Market Forces looked at five funds (AustralianSuper, Commonwealth Super Corporation, Australian Retirement Trust, Aware Super and AMP) which had all committed publicly to manage climate risk.

However, they failed to "demonstrate effective engagement strategies, including with Australia’s two biggest oil and gas producers, Santos and Woodside", Market Forces stated.

All funds in the report had acknowledged climate risk and the need for climate risk management, and had either set interim emissions targets, a 2050 net zero portfolio emissions target, or voiced support or claimed to align with the goals of the Paris Agreement. 

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But the climate change organisation pointed out this was not reflected in voting patterns of super funds, with ART and AustralianSuper voting for Santos' latest climate report while CSC and AMP did not disclose their vote.

“There’s an appalling gap between climate commitments and real action by our biggest super funds and this is a slap in the face for members who deserve a safe future to retire into,” said Brett Morgan, superannuation funds campaigner at Market Forces and report author.

According to the report, the five funds were “relying on influencing fossil fuel companies via ‘active ownership’ of shares and ‘engagement’ to meet climate targets and manage growing risk.”

“Super funds relying on active ownership to fulfil their climate commitments but failing to rein in rampant oil and gas expansion plans are greenwashing and exposing themselves to legal action for misleading conduct,” Morgan stated.

“Australia’s biggest super funds are failing to bring climate-wrecking companies like Santos and Woodside into line with a safe climate future. 

“Funds must step up to prevent fossil fuel expansion, and divest from companies that fail to respond.”

He added, “Net zero by 2050 means there can be no new oil and gas developments, but too many super funds have their heads buried in the sand on meaningful climate action.”

The Market Forces report would follow a landmark greenwashing case against Mercer Super last month, with the Australian Securities and Investments Commission (ASIC) warning this could be the first of several greenwashing penalties given to super funds.

Market Forces noted super fund trustees had a legal duty to manage climate risk, and a landmark 2021 legal opinion had concluded financial institutions that made net zero commitments must have ‘reasonable grounds’ to believe they will achieve these commitments, at the time they were made. 

“According to the legal opinion, it is foreseeable that super funds (and their directors) failing to do this could be found to be engaging in misleading and deceptive conduct.”