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FMIA highlights institutional investors’ crucial role in Australia’s renewable energy future

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By Rhea Nath
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5 minute read

The role of institutional investors in Australia’s economic future has come to the fore with the government’s latest Future Made in Australia (FMIA) announcement.

The Future Made in Australia Act comes off the back of a changing global economic landscape and the government’s intent to secure Australia’s global position in the international move towards net zero by maximising the economic and industrial benefits.

But on its journey to make Australia a renewable energy superpower, the government will need the support of institutional investors, including superannuation funds, which have long been looked upon as key to funding Australia’s future.

Following the official unveiling of the $22.7 billion investment that is the Future Made in Australia initiative on budget night, the Association of Superannuation Funds of Australia (ASFA) acknowledged the key role super funds will play towards meeting the government’s ambitious goals.

“Patient superannuation capital investment in vital infrastructure of the future is a win-win opportunity for super fund members and for Australia as a whole,” said ASFA chief executive Mary Delahunty.

Earlier this year, she shared that super capital investment in nation-building projects is an “enormous” opportunity for ASFA members.

“ASFA member funds are significant investors in nation-building, low-emission projects including wind farms, solar plants, and electricity distribution,” she said.

“Super’s role in funding the Australian economy continues to grow. Super funds’ total investment in infrastructure assets has increased fivefold to $165 billion, or 8 per cent of total assets, since 2010.”

In its post-budget analysis, the Financial Services Council (FSC) also highlighted the important role investors play in supporting Australia’s economic growth.

“Australia’s investment community is key to the transition to a low-carbon economy,” said FSC CEO Blake Briggs.

Just a few months before the government first hinted that the FMIA Act was in the works, eight super funds with a combined $1 trillion in member assets issued a blueprint of policy recommendations to help “super-power” the energy transition in Australia.

The funds – including AustralianSuper, Australian Retirement Trust (ART), CareSuper, Cbus, HESTA, Hostplus, Rest Super, UniSuper – alongside industry super fund-owned IFM Investors, laid out their recommendations in “Super-powering the energy transition: A policy blueprint to facilitate superannuation investment”.

The funds at the time argued that achieving net zero and transforming Australia into a renewable energy superpower will require investment on a “massive scale”.

The blueprint’s recommendations centred around policy reform in the areas of energy transmission, batteries and sustainable aviation fuel, which the super funds see as being the earliest opportunities for investment in Australia’s energy transition.

The funds also pointed to governments around the world for inspiration, highlighting countries such as the United States, Canada, Korea, and in the European Union that have introduced significant policy packages and incentives to attract investment in clean energy at scale and ramp-up the energy transition.

“This does not mean Australia needs to replicate the approach of other countries,” the blueprint noted. “Rather we should make the most of our comparative advantages with an ambitious and proportionate response, including policies, such as those outlined in this blueprint, to make Australia a renewable energy superpower.”

The government’s FMIA Act meets some of these requests, namely, according to Treasurer Jim Chalmers, the act will secure Australia’s place in a changing global economic and strategic landscape and put Australia at the forefront of change.

“This plan will help Australia build a stronger, more diversified and more resilient economy powered by clean energy to create more secure, well-paid jobs and encourage and facilitate the private sector investment required to make the most of this opportunity,” he said.

“It will invest in innovation and technology that will help ensure we remain globally competitive and recognises the vital role of regional Australia in our national prosperity.”

The plan also establishes a “new front door” for investors to make it easier to invest in Australia and attract more global and domestic capital, Chalmers explained.

“The Future Made in Australia plan is about attracting and enabling investment, making Australia a renewable energy superpower, value adding to our resources and strengthening economic security, backing Australian ideas and investing in the people, communities and services that will drive our national success,” Chalmers said.

Last month, outgoing chair of the Net Zero Economy Agency, Greg Combet, also flagged that institutional investors could play a role in the winding road towards net zero.

He noted that the net zero transformation remains a “very significant investment task”, which could present opportunities for investors to deploy private capital alongside the government.

“Ideally, institutional investors, private capital would see the opportunities in it and make commercial judgements and invest – and they are, where they can see that making sense,” Combet said.

“But I can see occasions and projects in this particular transformation where the government is going to need to play a role. That’s not novel – electricity infrastructure in the past has been virtually all public infrastructure, it’s only been privatised in recent decades.”

He admitted this was a “tough challenge” for private investors, given the legal requirements and permissions required, which he said the net zero authority would have to work through in coming years.