Australia the best for pension funds on climate change

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Australia’s Local Government Super has moved up to number one in the world for asset owners in dealing with the risks associated with climate change, according to the latest report by the well-regarded AODP organisation. And First State Super has come in third in the world ranking.

The AODP (Asset Owners Disclosure Project) fifth annual survey and rating of big global investors, published last week, shows that Australian and New Zealand funds are among the world’s most aware on assessing the risks associated with climate change.

The London-based AODP is an independent not-for-profit organisation which assess financial risks attributed to climate change. It has developed what is regarded the world’s leading framework for disclosure and management of those risks by institutional investors.

Around the world, the US and China are the worst for consideration of climate change, among pension and sovereign wealth funds, although the US is very polarised – having among the best and the worst, according to the report.

Among asset managers, rather than owners, Australia’s Macquarie Bank rates number one in the APAC region, but it is only a ‘D’. This compares with the average score of ‘B’ for asset owners in the region.

The New Zealand Super Fund has moved up for 94th position to 15th. In general, asset owners in the APAC region performed better than their local outsourced fund managers. As a nation across both asset owners and asset management, New Zealand moved from outside the top 10 to number 3 globally. Australia was ranked fifth.

Overall, a majority of asset owners – now 60 per cent, compared with 41 per cent previously – are taking action on climate change, the survey shows, helped by the Paris Climate Agreement of major nations in November 2016.

The report says that “Oceania”, which includes Australia and New Zealand, and Europe, are the most progressive regions, with the 10 most “progressive” countries. In eight of these, including Australia, New Zealand, the Netherlands, Ireland and Scandinavia, every pension fund has taken some action on climate risk.

A key result of the research is that asset owners are putting a lot more effort into their consideration of climate change as a risk than asset managers. Both asset managers and asset owners in the US and China are the worst with regards to climate change consideration.

The report says: “If asset owners in the US, who control US$10.3 trillion of assets [in the survey’s universe]– a quarter of the index – were to follow their peers in Europe, Australia and New Zealand, they could radically advance the global transition to a low-carbon economy.”

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