The Australian stock market has been called “a carbon bomb waiting to explode” for its world-leading exposure to fossil fuels.
What most people don’t know is that super funds own almost half of the Australian stock market. This puts the financial well-being of millions of Australians at risk.
And yet, there are opportunities for Australian super funds to lead us into a clean energy future. The $2.6 trillion invested can play a big role in deciding what kind of future we have.
Despite the reality of climate change and the urgent need to move towards a low-carbon future, most super funds are still investing members money in polluting industries and failing to adequately report on climate risk.
They are also failing to answer a simple yet vital question for customers – what are you doing with my money?
This reality has lead 23-year-old Queensland ecology graduate Mark McVeigh to sue his $50 billion super fund REST.
It’s a first for Australia, even though researchers, the finance industry regulator APRA and legal experts have been flagging climate risk as an urgent issue for super funds to address.
Now, slow-moving super funds are getting dragged into court for failing to account for such a significant risk. The evidence suggests fossil fuels are already dragging returns.
Analysis from the Future Super investment team shows that the average Australian with a super balance of $100,000 may be $8200 worse off because of their super fund’s investment in fossil fuels over the last five years.
Meanwhile, the future is not bright for fossil fuel companies.
The world has committed to limiting global warming to 2 degrees, which requires a very rapid shift away from the fossil fuel industry.
Too many investment managers are pricing fossil fuel companies as if they can dig up and sell all of their known fossil fuel reserves. When super funds own fossil fuel companies, they are gambling that the world won’t stick to the Paris climate goals.
Young Australians like Mark McVeigh shouldn’t have to sue their super fund to find out how much climate change risks their investment.
What we need is for super funds to stop hiding their investments, and that will only happen when members demand answers from their current fund, or leave for an ethical fund that’s transparent.
Adam Verwey is co-founder of Future Super and managing director of Future Super Asset Management.