- Thursday, 12 December 2013 | James Mitchell
A global NGO chaired by former Liberal Party leader Dr John Hewson is threatening to name and shame super funds that fail to ‘walk the talk’ on climate risk transparency.
Speaking at the Asset Owners Disclosure Project (AODP) Global Climate Index 2013-2014 survey release in Sydney yesterday, Dr Hewson said many large super funds are failing to demonstrate the transparency they demand of the companies they invest in.
“A lot of those bigger funds … weren’t prepared to apply the same standards of transparency to themselves in publicly accounting for the way they manage climate risk and why they are so heavily exposed to carbon-exposed industries,” he said.
“I think, in time, there will be more pressure from individual fund members getting their directors and trustees to explain their fiduciary responsibilities, which is not an easy thing to do.
“We have considered a hypocrisy index, where you not only rate them on what they are revealing on climate change but what they are concealing on climate change – how they demand standards from some but not themselves.”
Twenty-four asset owners submitted direct disclosures in response to the survey, an increase in the response rate of 41 per cent when compared to last year.
“When I looked at the numbers, originally we started focusing on the top 1,000 super funds, pension funds, insurance companies, sovereign wealth funds and endowment funds,” Mr Hewson said.
“They control about US$70 trillion worth of assets and own more than 50 per cent of all the listed companies on all the stock exchanges in the world,” he said.
“About 55 to 60 per cent of those assets [are] carbon-exposed investments, but only two per cent [are] low carbon.
“That’s staggering. That is a massive risk in itself. Then, when you’ve got a fair bit of pushback and denial and resistance and so on, I find that quite frustrating.”
Of the 1,000 funds surveyed, 460 were rated but only five funds – or less than one per cent - were AAA-rated.
“If all the AODP assets we surveyed were actually AAA-rated, we wouldn’t have to rely on politicians to make decisions on climate change because the investment community would be driving the reponse,” Mr Hewson said.
“We can do all this without politicians,” he added.
As a response to climate change, Mr Hewson said the best way forward was for investors to adjust their portfolios internally to be underweight on carbon assets and overloaded on low carbon investments.
However, this in itself poses huge risks, he said.
“People talk about the magnitude of the subprime crisis, but this crisis would dwarf that and it is a risk that is being run year in and year out.”
The AODP is an independent not-for-profit global organisation whose object is to protect superannuation and pension fund members’ retirement savings from the risks posed by climate change.
Latest from InvestorWeekly
- Nikko AM restructures multi-asset teams
- First State Super adds MSCI platform
- Henderson launches fixed interest fund
- Asset managers facing operational pressures
- Perpetual expands trustee services in Singapore
- Christian super funds merge
- Funds management mergers tipped to continue
- AMG acquires River Road Asset Management
- Aus Unity fund acquires option for green office building
- NAB in talks with global custody providers
- Creating super fund alpha
- Retirement income innovation must be inclusive
- Weighing up default fund insurance
- Don’t neglect developed markets
- Hunting for ‘preferred infrastructure’
- Westfield: a failure of engagement
- Can Europe avoid Japan’s fate?
- Cleaning up with clean technology
- Obsession with fees hurting retirees
- Do we need independent directors?
- BNP Paribas appoints head of Hong Kong
- AUSCOAL Super appoints CFO
- Towers Watson names global manager research head
- ICG appoints managing director
- Former Treasury adviser to join ASFA
- State Street appoints head of alternatives
- Mercer strengthens infrastructure team
- Bravura Solutions appoints CFO
- NGS Super board appoints employer director
- AustralianSuper appoints deputy chair