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Superannuation’s Carbon Footprint

Recently I posted an article called “Bursting the Carbon Bubble” by Michael Green. Below is Michael’s follow up article, which was published in The Age a couple of days ago. He raises the point that our superannuation could well be investing in the fossil fuel industry, suggesting that we should consider moving our superannuation into pension funds that do not support fossil fuels, if we seek a post-carbon world. As the saying goes: “Vote with your money.” Food for thought; food for action. 

After the article, I’ve posted a number of resources for those who’d like to look into these issues further. 

SUPERANNUATION’S CARBON FOOTPRINT by Michael Green 

If you insulate your home against the climate, insulate your money too.

YOUR carbon footprint comprises emissions from household energy use, transport, food, shopping and waste. But is that all?

A new social media campaign called The Vital Few argues there’s something we’ve overlooked: “Are you accidentally investing in climate change?” it asks.

“Maybe you reduce, reuse and recycle. Maybe you’re into using renewables… But are you even remotely aware of how your pension contribution is being spent on your behalf?”

The campaign is coordinated by the Asset Owners Disclosure Project. It’s a not-for-profit organisation, with board members including John Hewson, the former Liberal Party leader, and Sharan Burrow, the general secretary of the International Trade Union Confederation.

Dr Hewson says The Vital Few is about “empowering superannuates to contact their directors and trustees, and ask them why they are investing so intensively in carbon-heavy industries”.

He says an average pension fund now invests about 55 per cent of its portfolio in “high-carbon intensive industries” and only 2 per cent in their low carbon counterparts.

But those numbers must change: “These asset owners have a long-term, not a short-term, horizon,” he says. “Their responsibility is to maximise the returns to superannuates over time. How are they going to manage the risk of catastrophic climate change going forward? The best way is to put a higher percentage of their funds in low–carbon intensive industries.”

Julian Poulter, the executive director of the Disclosure Project, says it’s not only a worry for the environmentally concerned. It’s also about protecting your nest egg.

In the finance world, “climate risk” translates as the prospect of reduced earnings or devalued assets, caused by climate change. That could come by way of physical impacts – say, a flood that destroys infrastructure – or cheap clean technology, or tough policy measures, such as robust carbon pricing and regulations.

Last December, the organisation launched an index of the world’s largest pension funds, rating them on their management and disclosure of climate risk in their investment portfolios.

The highest rating fund was Local Government Super, in New South Wales. There were five other Australian funds in the top ten: CareSuper, Cbus Super, VicSuper, UniSuper and AustralianSuper.

Even so, the report concluded that no fund had “accurately assessed or managed its climate risk”.

Mr Poulter says the average fund member is 20 years from retirement. “By 2030 our climate and energy supply are going to look very different, under any scenario. Either the climate will be in such trouble that we’ll be into panic mode, or the fossil fuel industry will be in trouble,” he says.

Switching away from fossil fuels might mean a short-term sacrifice on returns, he says, but it’s the only way to avoid a long-term loss.

“When it comes to retirement, most baby boomers think they’re going to escape the climate crisis. Unfortunately, they’ll probably just be moving into the retirement home or the hospice by the time the impacts kick in. Economically, climate change could be very inconvenient for their superannuation,” he says.

He says that for most people, their home is their largest asset – followed by their super. There’s no sense in greening one while the other is actively brown.

“We think that once people join the dots, as customers of these funds, they will be in a position to influence the debate and drive change in the industry.”

Illustration by Robin Cowcher

Read this article at The Age online or at Michael Green’s website.

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And here are some resources for those who’d like to look into these issues further, compiled by Govind Maksay. Thanks Gove! Download file here: Resources-1

See also: http://www.resilience.org/stories/2013-03-22/can-a-divestment-campaign-move-the-fossil-fuel-industry AND http://www.resilience.org/stories/2013-03-27/the-reasoning-behind-divestment

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