A majority of super funds have not provided, as required by APRA, adequate evidence they are considering climate risk, making them vulnerable to legal action, says a new report.
The report, from environmental group Market Forces, found 82 of the 100 largest super funds have provided “inadequate or no tangible evidence” they have considered climate risk in their investment portfolios.
Market Forces also sought legal opinion from Noel Hutley SC and James Mack, who found the failure to address climate risk put trustee directors “at risk of breaching their duty to members”.
In a speech on 17 February, APRA executive board member Geoff Summerhayes said climate risks were becoming “an important and explicit part of our thinking”.
In the speech, Mr Summerhayes also made reference to an opinion by Mr Hutley that super trustees who failed to disclose foreseeable climate-related risks to their business could be “held personally liable for breaching their statutory duty of due care and diligence under the Corporations Act”.
The Market Forces report found that when considering 99 per cent of all large superannuation fund assets, only 18 out of 100 funds were found to have provided adequate evidence of their consideration of climate risks.
Market Forces analyst Dan Gocher labelled the findings "extraordinary".
“It is extraordinary that more than 80 per cent of Australia’s super funds have still failed to disclose how they are managing an issue that APRA has singled out as an immediate, material, financial risk,” Mr Gocher said.
“Australian regulators have made it clear that super funds need to assess climate risk.
“Since this has largely fallen on deaf ears, it’s no surprise that trustees now find themselves open to legal action for a dereliction of basic fiduciary duty.”
Of the 18 funds found to be up to scratch, only nine were providing their members with “limited” regular research or updates on climate risk.
Though less than one in five super funds were found to disclose climate risk consideration, Mr Gocher attributed this to the slow-moving nature of the industry.
“You can call it group-think: someone doesn’t want to be the first to move, doesn’t want to be the last to move, you just want to go together,” he told InvestorDaily.
“The fact that we’ve got 18 is a bit of progress.
“This kind of acceptance of climate risk as financial risk is becoming more accepted.”
He also said that regulatory and industry changes took time to come into effect, and that policy leaders needed to take stronger action on this issue in order to impact corporate leaders’ thinking.