Eight super funds with a combined $1 trillion in member assets have issued a blueprint of policy recommendations, which they say could help “super-power” the energy transition in Australia and deliver returns to their members.
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”.
According to the blueprint, achieving net zero and transforming Australia into a renewable energy superpower will require investment on a “massive scale”.
Approximately $12 billion a year is expected to be needed between now and 2050 in the electricity sector alone. Additionally, more than $40 billion a year will be needed to decarbonise other sectors of the economy and grow energy-intensive export industries.
“Much of this investment will be capital-intensive with long-time horizons – a good match for Australian superannuation funds which are able to offer long-term financing,” the blueprint argued.
“Superannuation funds have a clear-eyed focus on achieving the appropriate risk-adjusted returns in line with our duty to act in the best financial interests of superannuation fund members.
“With the right policy settings and pipeline of investment opportunities, superannuation can be a significant source of capital for the Australian energy transition, helping workers achieve a dignified retirement in a more sustainable world.”
The blueprint’s recommendations are 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.
“Investment in these key elements of transition can deliver strong risk adjusted returns for working people’s retirement and open up longer-term investment opportunities in other sectors which will put Australia on the path to becoming a clean energy superpower.”
Among the key recommendations made by the funds are faster approvals for transmission projects, the removal of regulatory barriers to battery projects and the development of a local sustainable aviation fuel industry.
“Achieving our net zero target will take bold and decisive action from governments, industry and investors,” commented AustralianSuper chief executive Paul Schroder.
“The challenge we face is not a lack of capital, but a shortage of good quality investment opportunities. Collaboration across all sectors of the economy, underpinned by policy certainty, will deliver the outcomes we need to respond to this challenge and deliver better outcomes for all.”
In the blueprint, the super funds welcomed recent action in climate and energy policy by state and federal governments but warned that the Australian energy transition is still at risk of falling behind as investors turn to more compelling opportunities overseas.
Governments around the world, including the United States, Canada, Korea, and in the European Union, have introduced significant policy packages and incentives to attract investment in clean energy at scale and ramp up the energy transition.
Subsequently, the blueprint noted that super fund capital is being directed towards energy transition projects in jurisdictions where they can generate stronger risk-adjusted returns.
“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.”
Commenting on the release of the policy blueprint, HESTA CEO Debby Blakey said: “Australia stands poised to become a global leader in the energy transition given our large pools of patient, sophisticated capital.
“This blueprint provides the stable, cohesive policy settings needed to help break down many of the barriers HESTA and other investors face when seeking to invest in Australia’s energy transition.”
In a recent speech to the ASFA Conference, former deputy governor of the Reserve Bank of Australia, Guy Debelle, emphasised the potential for Australia’s super sector to play a pivotal role in financing the country’s transition to a low-carbon economy.
According to Dr Debelle, the investment opportunities for the super sector lie in financing multi-year projects that align with the patient capital characteristic of super funds.
“They’re multi-year projects and take one or two years to deploy, or even two or three years to deploy, but the returns are 15, 20, 30 years,” he said.
“The energy contracts in green energy almost certainly are going to look a lot like those in the LNG industry which are 10, 15, 20-year offtake contracts.”
