With the current total financial investments of APRA-regulated funds standing at $2.3 trillion, and projected to reach $10 trillion by 2050, the superannuation sector possesses substantial resources that can contribute to the net zero challenge.

A Collective Responsibility

ASFA's interim CEO, Leeanne Turner, emphasized that while the government plays a critical role in facilitating an orderly transition, the responsibility for achieving net zero emissions extends to the entire society. This includes the involvement of businesses, financial institutions, non-government organizations, and community-based groups.

Complex Requirements for Individual Funds

The transition to net zero portfolio emissions poses complex challenges for individual superannuation funds. It requires the integration of decarbonization into established frameworks, ensuring long-term value creation and risk management.

These requirements further underscore the crucial role that APRA-regulated superannuation funds will play in driving the transition to a net zero economy.

Vital Elements for Superannuation Funds

ASFA identifies several vital elements that superannuation funds must focus on to contribute to the collective challenge:

  • The development of transition plans in key sectors of the real economy
  • The establishment of an investment taxonomy aligned with the net zero transition
  • The creation of internationally-aligned standards for climate-related risk disclosure

ASFA will provide more detailed information on these elements in its submission on the government's consultation paper for its sustainable finance strategy.

The Government's Role

While superannuation funds have a key role to play, the government also has a critical part to ensure an effective shift towards a net zero economy:

  • Developing frameworks to enhance the quality of disclosed data on climate-related risks and opportunities
  • Removing barriers, such as regulations and planning restrictions, that hinder the allocation of financial capital for renewable energy infrastructure
  • Providing targeted incentives for crucial investments that may not attract private financial capital on a risk-return basis
  • Enabling investments in critical infrastructure that may not be attractive to the private sector based on risk-return considerations

By establishing the necessary conditions and taking proactive measures, the government can effectively steer the economy's structural changes and facilitate the required scale and timing of fixed capital investments.