The year 2011 has been dubbed the year of regulatory change, and for good reason.
The superannuation industry will be faced with the implementation and preparation for SuperStream and MySuper, while it will possibly also see the abolition of the capital gains tax rollover for mergers.
The Future of Financial Advice reforms will also affect the industry's advisers, and when you think you've had it all, the federal government wants to introduce a carbon tax, starting on 1 July 2012.
This latest proposal will affect super funds both directly and indirectly. The direct impact will be on the cost of offsetting the carbon emissions that are the result of running a fund, but the carbon tax will also affect a fund's investment strategy.
According to a recent Mercer report, climate change could determine 10 per cent of the total risk in a portfolio over the next 20 years.
The higher risk is partly the result of higher costs for companies. A report produced by Trucost for VicSuper showed that companies listed in the ASX 200 Index directly emitted a grand total of 151 million tonnes of CO2 over 2008.
The report calculated the cost associated with these emissions amounted to 1.3 per cent of a company's earnings, and that was based on a price of just $10 per tonne, while economists have predicted a price as high as $26 per tonne based on the Rudd government's aborted emissions trading scheme.
Lower company profits mean super funds are likely to generate lower returns from their Australian equity portfolios.
The efforts to reduce the carbon count of investment portfolios, therefore, will not only translate into good environmental, social and corporate governance policy, but could also become a way of optimising returns.
The proposal is still subject to the government's ability to negotiate an agreement with a majority in both houses of parliament and pass legislation this year. If successful, a carbon price mechanism will start with a fixed price period for three to five years, and will then transition to an emissions trading scheme.
The carbon tax has been welcomed by the Investor Group on Climate Change, whose members include a number of super funds, including HESTA, VicSuper and ESS Super.
The group said the sooner Australia moved to a flexible, market-based price with a cap on pollution, the less it would cost to prepare for a low-carbon global economy.
Although many funds have given the topic much thought in the past decade, the carbon tax is yet another complexity that trustees will have to wrestle with this year.
