<a href="http://www.gmagazine.com.au/blogs/leon#">The Business of Green</a>

The Business of Green

Money matters in the green world, by Leon Gettler.

Climate change hits superannuation


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For years, many super funds ignored climate change and went about salting away money for our retirement. Now it looks like they can no longer afford to do that. Australia has more than one trillion dollars invested in superannuation and that money could be at risk. Climate change is a superannuation issue. It could wipe out our retirement incomes.

Reuters reports that a landmark report completed by asset consultants Mercer, and 14 global super funds with $2 trillion invested between them, has some alarming revelations for all our retirement incomes. According to the report, our current approach to managing risk is no good with climate change putting trillions of investment dollars at risk over the next 20 years.

Just think of the impact of the Queensland floods, and the flash floods around the rest of the country on businesses and the economy and you’ll begin to see the point.

"Weather events like the recent floods in Australia will continue to impact infrastructure, food security and property, contributing to material portfolio risk for institutional investors," Investor Group on Climate Change in Australia chief executive Nathan Fabian said.

The study found that costs coming from the environment, health and food security could exceed $4 trillion by 2030, and far more if there were policy delays. It also found that some investments might be directly affected by rising risks of climate change related events. These would include investments in infrastructure and coastal zone property (floods and storm damage), water availability (drought and flood risk). There would also be knock on impacts on agriculture and health.

On the other hand, the 132 page report says climate change represents a great investment opportunity with technology investments to create a low carbon economy likely to accumulate to $5 trillion by 2030.
No doubt all this will change the investment strategies for many super funds. It’s already started. The Financial Times reports that some pension funds plan to change their asset allocations as a result of the report.

“The risk numbers indicate this is a very real risk,” said Helene Winch, director, head of policy at BT Pension Scheme Management told the FT.

All this is another piece of evidence showing that climate change has some very serious investment and financial risks. It’s very much a business issue.