The $2.3 trillion superannuation industry is so woeful in its disclosure of climate risk that trustees could be in breach of their legal duties.
Sixty of the 100 biggest super funds, or three out of five, have no disclosure of climate risk at all, according to the August report by Market Forces, an affiliate project of environmental group Friends of the Earth.
![Market Forces' Daniel Gocher says "trustees and super funds must be considering climate risk and disclosing their ...](http://web.archive.org./web/20170804095231im_/https://www.fairfaxstatic.com.au/content/dam/images/g/x/o/2/n/j/image.related.articleLeadwide.620x349.gxnpj9.png/1501672945378.jpg)
This includes large players such as retail fund Colonial First State, which represents 2.19 million members and $86.99 billion, and industry fund REST, with 1.96 million members and $41.52 billion under management.
Another 22 funds in the top 100 have inadequate disclosure â defined as a public position that mentions climate change, but fails to back it up with any discussion of how it's being handled in practical terms. Market Forces analyst and report author Daniel Gocher told Fairfax Media it was a "low bar" to be deemed as inadequate and there was a big gap between those making adequate disclosure and the rest.
![Sixty of the 100 biggest super funds, or three out of five, have no disclosure of climate risk at all.](http://web.archive.org./web/20170804095231im_/https://www.fairfaxstatic.com.au/content/dam/images/g/x/o/2/m/3/image.related.articleLeadwide.620x349.gxnpj9.png/1501672945378.jpg)
"It's extraordinary that more than 80 per cent of Australia's super funds have still failed to disclose how they are managing an issue that APRA [Australian Prudential Regulation Authority] has singled out as an immediate, material, financial risk," Mr Gocher said.
"Billions of dollars of Australian retirement savings are at stake from the physical and transition risks of climate change."
Only 18 out of the 100 biggest super funds in Australia have adequate disclosure of climate risk. This includes large players such as retail funds AMP and BTFG and industry funds AustralianSuper, UniSuper, Sunsuper and HESTA.
Overall, retail funds perform worse, as they represent just 31 per cent of the assets under management in the 100 largest super funds, but 52 per cent of assets under management for the group of funds that disclose no consideration of climate risk.
It's a problem for the business sector more broadly not just super, particularly given Australia's energy-intensive economy. The Australian Council of Superannuation Investors released research last month that found only a small number of ASX200 companies were meeting best practice for sustainability reporting.
Market Forces relies on information in the public domain and it's possible some funds have well-developed climate policies they have not made public. But there's a growing expectation that funds need to both develop a robust response to climate change as a financial risk and also disclose their approach and outcomes to members and the regulator.
A new legal opinion by Noel Hutley SC and James Mack, commissioned by Market Forces, reinforces that trustee directors of super funds are legally obliged to consider climate change risks to the extent they intersect with members' financial interests. This does not include self-managed funds.
The lawyers found the directors should source, consider and weigh relevant information relating to climate change risk and record their decision making processes.
This builds on remarks by the superannuation regulator APRA positioning climate change as a financial risk, not purely an environmental, social and governance risk.
APRA board director Geoff Summerhayes said earlier this year that climate change is a "material risk" and many climate risks are "distinctly financial in nature" and "foreseeable, material and actionable now".
Speaking generally rather than specifically about climate risk, APRA deputy chairwoman Helen Rowell said last week that super funds need to do a better job of using objective metrics to measure whether they are acting in the best interest of members, and reporting on their progress.
"We need to shift from 'of course we act in best interest of members' ... to seeing the concrete evidence of how trustees are turning their minds to that," Ms Rowell said.
Financial Services Minister Kelly O'Dwyer has announced a proposal to give APRA more powers to penalise super funds that are failing to meet their obligations.Â
However, Mr Gocher said there didn't need to be a change in the law because APRA and the Australian Securities and Investments Commission already had relevant powers.
"It's pretty simple really â trustees and super funds must be considering climate risk and disclosing their considerations to members," Mr Gocher told Fairfax Media. "If you don't think it's a risk in the short term, then disclose as much to members but to tell them nothing is not really a path forward."Â
A spokeswoman for industry group, the Association of Superannuation Funds of Australia, said superannuation fund trustees were "best placed to consider how to manage risks, including climate".
She noted the government was introducing a disclosure regime from 2019 that would require detailed public disclosure of funds' investment decisions.
Caitlin Fitzsimmons is the editor of Money.
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