Australia’s Future Fund is a “beginner” in the case of managing local weather danger, an unbiased report has discovered.
The sovereign wealth fund’s board of guardians has nearly $250 billion in property below administration, principally dealt with by exterior managers with a watch on long-term returns.
Assessed utilizing established trade instruments, the fund scored the bottom stage – or “beginner” standing – on local weather danger funding, investor disclosure and governance, and no proof of company engagement on local weather danger.
The report by the unbiased Centre for Policy Development acknowledged {that a} full evaluation of the local weather danger response was troublesome as a result of the fund had not printed a local weather technique or local weather danger disclosure, which researchers stated was “concerning”.
The fund has not set objectives for portfolio decarbonisation, short-term portfolio emissions depth or inexperienced funding, in line with the evaluation of publicly out there info.
Centre director Toby Phillips stated, in the end, local weather dangers within the Future Fund are borne by taxpayers.
“As citizens of a country with a lot to gain from energy transition and a lot to lose from climate inaction, Australians will naturally be concerned by these findings,” he stated.
“The Future Fund is a major institutional investor acting on the global stage, and it’s reasonable to expect them to play by the same rules as other major investors and asset managers on climate risk.”
Although there are not any agreed requirements, fund managers are more and more adopting frameworks and techniques for addressing local weather danger and decarbonising funding portfolios.
Elsewhere, government-owned sovereign wealth funds and public pension funds – from Japan to Singapore and Norway – have begun to comply with swimsuit.
Australia’s fund has said it’s responding to local weather change dangers, however the report’s evaluation of trade apply amongst sovereign wealth funds, institutional buyers and trade frameworks suggests it’s not assembly worldwide finest apply.
The report additionally discovered it was unclear whether or not portfolio testing was towards sufficiently strong eventualities, such because the International Energy Agency’s internet zero emissions by 2050 situation or different eventualities meant to restrict world warming to 1.5 levels.
The federal authorities may set a stronger course for the fund on local weather change by the official funding mandate and assertion of expectations.
This may embrace requiring the fund to focus on internet zero emissions throughout its portfolio by 2050.
The report recommends that federal parliament order the Future Fund to publish local weather danger info, and be lined by any new legal guidelines governing local weather danger disclosure in Australia.
Parliament can also be urged to arrange an unbiased evaluation by a panel of skilled funding professionals and contemplate amending the funding mandate so the fund follows trade finest apply.
In a press release to parliament this month, Future Fund chief govt Raphael Arndt stated finest apply “is still being determined”, however the fund helps local weather danger disclosure from exterior managers so it will probably entry constant and standardised information.
The board believes exclusion of fossil fuel-exposed firms wouldn’t be according to the long-term requirement to satisfy the fund’s funding mandate, he has stated.
