Super funds wake up to Australia's ESG lag

There is a “seismic shift” among industry super funds to focus on carbon reporting, according to Research Affiliates.

Last week, Future Super co-founder Adam Verwey said there was a wide disparity in how super funds were reporting on carbon.

Speaking to Super Review, Research Affiliates director of research for Australia, Mike Aked, said Australian firms were lagging on their reporting of environmental, social and governance (ESG) issues but there had been a recent shift.

This was helped by moves by President Biden in the US to re-join the Paris Climate Accord after former President Trump exited it during his presidency.

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“Industry funds have said they are seeing a seismic shift in the last month, there has really been a movement and this is driven by the US. The US are starting to get serious on it but Australia has been ignoring it,” Aked said.

“There has been discussion in Australia on ESG parameters but we need to get harder on this and show we are compliant which means being 30% below the carbon intensity benchmark [on greenhouse gas emissions] and reduce by a further 7% each year.”

The UK and Europe were known as the leaders in ESG and carbon reporting, and Aked said Research Affiliates would not work with portfolios in those countries that weren’t carbon sensitive or had a carbon net zero policy.

“In Australia we have talked about it but there has been no real momentum whereas the UK and Europe have seen measures come out about defining carbon sensitivity and being compliant,” he said.

From 2022, under the Sustainable Finance Disclosure Regulations, firms in the EU would be required to integrate sustainability risks into their internal processes to help the investment sector meet the goals of the Paris Agreement.