The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Nick Sherry

Nick Sherry

Minister for Superannuation and Corporate Law

3 December 2007 - 8 June 2009

Speech of 25/09/2008

NO.026

Launch Of Climate Institute-Australian Institute of Superannuation Trustees Inaugural Australian Asset Owners Climate Change Initiative

25 September 2008

Good Morning, Thankyou

Thank you for the opportunity to launch this initiative.

Climate change has emerged as one of the greatest challenges we face - environmentally, economically and socially.

Collaborations such as the one we're here to launch today reflect the growing recognition in the superannuation industry of their sector's exposure to the impacts of climate change and the important position it plays in tackling the climate change problem.

I would like to take the opportunity to applaud the Australian Institute of Superannuation Trustees (AIST) and the Climate Institute for their leadership in building the superannuation industry's capacity to identify and manage the risks and opportunities climate change.

AIST's groundbreaking collaboration with Trucost UK to produce the Carbon Counts report released earlier this month was a ground- breaking contribution to the understanding of the exposure of the superannuation sector to carbon related risks.

The report finding that by rebalancing the ASX S&P/200 based on carbon efficiency, the index's carbon footprint could be reduced by 42% without sacrificing returns or diversification, clearly demonstrated the prospect for investment opportunities and risk reduction.

I would also like to acknowledge The Climate Institute's support of the Carbon Disclosure Project, a vital tool that can give investors the information they need to incorporate carbon risk into their long term decision making process.

This survey builds on this and other work and is an important step in gaining a clear understanding of how institutional investors are managing the significant risks and opportunities associated with climate change.

It represents a great opportunity for Australian superannuation funds to lead the world in the global response to climate change.

Climate Change

The Rudd Labor Government recognises climate change as a priority for decisive and responsible action and understands the critical relationship between tackling climate change and achieving long-term sustainable economic growth.

The draft Garnaut Climate Change review predicts that failure to mitigate greenhouse gas emissions could result in a lowering of Australia's GDP by around 1% by 2025 and 4.8% by 2100. However, early action could reduce these risks and lower mitigation cost.

The Government is committed to working with the investment community to ensure that the risks of climate change are more than offset by a leadership position in technology, infrastructure and energy investment.

Harnessing the response from capital markets through the redirection of capital flows from "high emitting" capital to "low emitting" is a critical part of combating climate change.

Up to now the wrong incentives in the market have driven climate change.

The introduction of a broad-based Carbon Pollution Reduction Scheme in 2010 will set us on a path to reduce Australia's emissions at least cost.

Under the CPRS, carbon exposure will become increasingly financially material to investors.

It will provide real incentives and the regulatory and investment certainty needed to drive essential investment in low emissions projects and technologies.

Investors will have to manage this exposure and identify investments that will be best positioned in an increasingly carbon constrained environment.

The Government has commitment to expanding the renewable energy target (RET) to 20% by 2020.

Australia's transformation into a low carbon economy will require substantial investment in long lived assets.

The CPRS, together with the RET, will make renewable energy investment particularly appealing for superannuation funds to diversify their investment portfolios and invest in sustainable projects that keep performing over the long run.

Role for Superannuation Industry

With superannuation investments representing around A$1.1 trillion in assets, it is clear that trustees will play a major role in driving the capital market's to respond proactively to climate change.

Trustee responsibilities

As the AIST and the Australian Council of Super Investors stated in their joint submission to the Government's Green Paper on the emissions trading scheme: "as significant long-term owners of Australian companies - not-for-profit superannuation funds have a fiduciary obligation to address climate change risks and these should be addressed soon rather than later".

Conclusion

It gives me great pleasure to launch the Asset Owners Climate Change Disclosure project.

This initiative is an important step in building the capacity of superannuation funds to deal with their exposure to climate change. It is an exciting first stage in a program to drive leadership by Australian superannuation funds in the global response to reducing greenhouse gas emissions.

The superannuation industry's approach to these issues will not only be important in securing the retirement income of Australians, but is critical to harnessing the power of the market to combat climate.

The sector's response will be critical to securing Australia's economic and environmental future.

I encourage all superannuation funds that receive this survey to be enthusiastic and candid in their response.

Once again, I congratulate the Australian Institute of Superannuation Trustees and The Climate Institute on this initiative and their continued commitment to a sustainable future for Australia.