The new climate and social requirements for super: is your fund ready?

Updated Feb. 28, 2023

Home / News / The new climate and social requirements for super: is your fund ready?

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Australian superannuation funds hold over $3 trillion in assets. Most of these assets are held in their largest funds, which are called balanced options that hold around 60% in listed equities. From last year funds were required to provide a list of their holdings, which most funds now do in various formats on their websites.

Recently the AFR wrote that Treasurer Jim Chalmers has been putting in place new legislation that will require super funds to deliver a sustainable outcome. In light of this announcement, we analysed some of Australia’s largest super funds (list provided by APRA) with a combined 4.9 million members and over $500 Billion in assets in their balanced options.

We analysed some of Australia's largest super funds

We analysed the top 10 industry funds' balanced options. The sustainability contribution and risks of these funds were assessed using the Sustainable Platform database of 22,000 companies combined with each of the super fund’s balanced equity holdings which we accessed in February 2023.

We found that there is a significant difference in the carbon risk, stranded asset risk, and climate alignment of these funds to the Paris climate agreement.

Figure 1 - Number of Members and Carbon Risk of Large Balanced Funds vs. the average carbon risk for all global equities. Note the straight line is the average industry fund result.

Sources: APRA, Host Plus, Aware Super, HESTA, UniSuper, CARE Super, LGIAsuper, NGS Super, LGSS (Active Super), Telstra Super, Vision Super, Sustainable Platform database

Of the 10 funds analysed, only three had less Carbon Risk than our average of all global equities. These three were UniSuper, NGS Super and Vision super. We attempted to analyse other large funds including Australian Super and REST as their holdings were not in an easy-to-analyse format.

There is also very little correlation between the number of members a fund has and the degree to which it has aligned itself to reduce climate-related impacts.

Figure 2 -Greenwashing Risk vs. Assets Under Management of Balanced options for large Australian Super Funds.

Generally, the bigger the fund, the less Greenwashing Risk there is, however this isn’t always the case. As funds start to implement requirements towards measuring their environmental and social impact, having a baseline and knowing where they currently stand will become more important than ever.

For Greenwashing Risk, the 3 best-performing funds were LGSS (Active Super), UniSuper and Aware Super.

Funds analysed in the research include Aware Super, CARE Super, HESTA, Host Plus, LGIA Super (Brighter Super), NGS Super, LGSS (Active Super), Telstra, UniSuper and Vision Super. These funds were chosen as they have the most number of members and provided their holdings on their web sites in a reasonably consistent format, which made this analysis possible.

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