Australian superannuation companies have the fourth biggest pool of super funds in the world and, apparently, the money is so weighty in their pockets that they need to invest it offshore.
According to a media release on Tuesday, Australian Super is poised to invest a whopping £18 billion (A$35.22 b) into the UK, by 2030.
The money will go into the Brits’ energy transition, digital infrastructure, mixed-use estates, and transport/logistics.
The UK’s prime minister Rishi Sunak was delighted, as you’d expect.
“AustralianSuper’s investment in the UK is a vote of confidence in the British economy – proof that our plan is working,” he said.
“We’ve already halved inflation, debt is forecast to fall, and – with thanks to smart investors like AustralianSuper – we’re on course to grow the economy.”
The big question is why isn’t that money doing that same wonderful job of growing our own green economy? The UK is in official recession after all, and we’re not – yet, at any rate.
We need all of those investment pieces – urgently. And when they say “mixed use estates” we bet that includes housing.
We need housing in Australia.
So what’s going on?
According to AustralianSuper and any other super company you care to nominate there’s a weighting or balancing issue at stake. The funds will tell you they’re obliged by legislation to provide the best possible return for investors and that this often means investing overseas.
But don’t all these growth sectors that AustralianSuper pouring our money into in the UK, also have huge upside in Australia as well?
And what about the long term benefits of the super fund’s members? You’d expect they would get a lot of value from bigger national investments in green energy, tech infrastructure and mixed use projects.
John Connor who heads up the Carbon Market Institute says things need to change.
His own organisation on Tuesday announced it was toughening up the rules on its own members, obliging carbon-intensive and large corporate members to have “publicly available decarbonisation transition plans by mid-2025 to be eligible for full membership, or to be a lead sponsor at major CMI events”.
“We have the fourth biggest pool of super funds in the world because of compulsory contribution so we should be global heavyweights in investment trends,” Connor says.
But the super companies generally play coy. They cite legislation that says they must invest for the best outcomes for their members and they interpret this to mean they need to avoid alternative sustainable investments and search for opportunities offshore.
Connor says it’s an odd kind of claim to make these days that investing in climate positive work is not of long-term benefit to members.
“They should not be driven by day to day results,” he says, adding that there is talk of change on the way.
Blair Palese, who writes for Climate and Capital and is director of Philanthropy at Ethinvest, says a switch in focus to Australian investments would not be so hard to make. It would be an administrative change, not legislative – so, far from messy.
Palese says the current super rules are a relic from the past – “a giant 1950s fossil fuel infrastructure economy where you just dig and ship”.
The idea was to “invest in a handful of companies, and your job was done”.
Today it’s a vastly different world – a decarbonisation and transition economy with an array of “amazing investment opportunities” through savvy technical companies that are nimble and switched on.
“It means our opportunities for investment are incredible,” she says.
But with new and maybe smaller opportunities there’s a need for a bit more work and analysis than the super funds are used to – it’s so much easier to go overseas because opportunities in Europe and the US are so much bigger.
Change is on the way – hopefully
Palese says the government is thinking about change to the rules for super.
Some, such as Hesta and Aware Super, are already making their own transition.
Aware Super senior portfolio manager for infrastructure Mark Hector, told SuperReview early last year that the super fund was “excited to deepen its $2 billion commitment to renewable energy and climate solution opportunities”.
In fact, it turns out that AustralianSuper is part of a group of super funds calling on the government to change the rules.
In December last year the group, with $A1.2 trillion under its belt, called on the Australian government to make policy changes to “help enable investment toward transitioning to a low-carbon, net-zero economy and to ‘make Australia a renewable energy superpower’.”
Other group members include ART, CareSuper, Cbus, HESTA, Hostplus, Rest Super, UniSuper and investment firm IFM Investors.
The group published a policy blueprint estimating that the transition would cost about $12 billion a year to 2050 in the electricity sector alone and more than A$40 billion a year to “decarbonise other sectors of the economy and grow energy-intensive export industries”.
Connor also holds strong hopes for the various task forces and organisations in deep development work for Australia’s future.
He’s keen to see the direction Greg Combet will take the $211.9 billion Future Fund when he takes the role of chair mid year. Already both Combet and Treasurer Jim Chalmers have said the fund will play a bigger role in the clean energy transition.
Connor also thinks it will be interesting to watch how the Future Fund interacts with Martijn Wilder’s work as chair of the National Reconstruction Fund and how both these groups align with the work of organisations such as the Clean Energy Finance Corporation and the Powering the Regions Fund.
Palese says a lot of good things are happening in Canberra; though progress is hampered by 10 years of inactivity during which time talented people in the climate and energy sectors were stripped out of the public service by the former Coalition government or “kept their head down”.
Let’s hope those heads pop up over the parapet once more and that this time they see a field of opportunities.