On Thursday, the Australian Prudential Regulation Authority (APRA) announced the release of its final guidance on investment governance for superannuation trustees.
According to APRA, the updated guidance aims to assist trustees to meet their obligations under Prudential Standard SPS 530 Investment Governance. Enhancements to SPS 530 to strengthen investment governance practices came into effect at the start of this year.
The regulator said the release of Prudential Practice Guide SPG 530 Investment Governance represented the last step of recent reforms to SPS 530 as well as SPG 530.
“APRA commenced the process of uplifting and strengthening investment governance practices across the industry in September 2021 and has made changes, in consultation with stakeholders, to both SPS 530 and SPG 530 over this time,” it said.
A draft version of SPG 530 was originally released for consultation in November last year. Twelve submissions were received from RSE licensees, industry associations, and other stakeholders, with the regulator meeting with a number of parties over the consultation period.
“Respondents were broadly supportive of draft SPG 530 but requested that APRA consider further guidance relating to ESG risks, stress testing, valuations, and governance of investments,” the regulator said.
Subsequently, the final version of SPG 530 includes additional guidance to support requirements in SPS 530 relating to liquidity management, stress testing, and asset valuations.
The guidance also outlines how APRA expects super trustees will consider environmental, social, and governance risk factors as part of their overall investment risk management.
Additionally, SPG 530 provides greater clarity in areas requested by industry, along with “a more streamlined approach to guidance” in line with APRA’s plan to modernise the prudential architecture.
“By making these significant changes, APRA seeks to drive more robust governance of fund investments and ensure trustees put the best financial interests of their members at the centre of investment strategies and decisions,” said APRA deputy chair Margaret Cole.
“The reforms have been broadly welcomed by trustees, many of whom have sharpened their focus on the valuation of unlisted assets, liquidity management, and stress testing in recent months. We note that in some cases, trustees have already aligned their investment governance to the draft guidance released for consultation in November 2022.”
The FAR is due to apply to authorised deposit-taking institutions (ADIs) six months after the Financial Accountability Regime Bill 2023, which was introduced into Parliament in March, receives royal assent, and to insurance and superannuation entities a year later.
