Australian investors collaborate on sustainable finance roadmap

The Australian Sustainable Finance Initiative, an alliance of 80 financial institutions and investors, has published its first roadmap to creating a sustainable financial system.

The ASFI was formed following industry discussions in 2017 and has among its participants real assets investors such as AMP Capital, the Clean Energy Finance Corporation, First Sentier Investors, IFM Investors, Impact Investment Group, and QIC.

Membership also includes Australia’s big four banks and several superannuation funds, including Aware Super, AustralianSuper, Cbus, Future Super, Hesta, Media Super, Rest and State Super.

The roadmap  calls for participants in the financial system to embed sustainabilityin their organisation’s leadership and strategy and to support the transition of the Australian economy to net-zero emissions by 2050. The Australian federal government has only made a commitment to reduce emissions 26-28 percent below 2005 levels by 2030.

The roadmap includes 37 specific recommendations grouped under four headings: embedding sustainability into leadership; embedding sustainability into practice; enabling resilience for all Australians; and building sustainable financial markets.

Now that the roadmap has been released, it is intended that the ASFI will become a permanent organisation in 2021 to monitor and report on how implementation of the recommendations is progressing. It will “act as a clearing house for the exchange of ideas, knowledge and practices, developing guidance and undertaking special projects”, it said.

ASFI co-chairwoman Jacki Johnson said in a statement: “Many of the challenges that Australia faces are global in nature and, beyond our borders, a major international shift is underway shaping capital flows. There is an urgent imperative for Australia’s financial services sector to act to remain globally competitive in a world increasingly prioritising a sustainable economy.

“We are seeking to re-orient capital – where capital is lent, what it insures and where it is invested – to supporting and building value today while strengthening the economic, natural and social assets that underpin our long-term prosperity.”

Australian investors and superfunds have individually begun making commitments to reduce emissions across their portfolios to net zero by 2050 in recent months. IFM Investors did this in October while pledging to become a net-zero emissions organisation. Superfunds Cbus, Hesta and Rest also committed this year to reaching net-zero emissions across their portfolios, the latter after a 25-year-old man from Brisbane successfully sued the fund over its handling of climate change.

Cbus chief investment officer Kristian Fok, who sat on the ASFI Roadmap steering committee, said: “ASFI will provide strong benefits in relation to creating common frameworks and taxonomies that can be applied across the financial services sectors, including alignment with global initiatives. Most importantly implementation of the roadmap will help support better outcomes for our members as we transition to a more sustainable future.”

Superfunds’ willingness to make commitments on emissions and re-orient investments to mitigate climate risk is somewhat at odds with recent comments made by assistant minister for superannuation Jane Hume.

She told the Financial Times that the “mission of a superfund is not to change the earth’s temperature, it is to create a return on investments for those individual members”.

She said: “If [superfunds] feel there is an illiquidity premium available by investing in infrastructure, then that is fantastic, but funds need to remember that they are not investing in that infrastructure to create jobs or rebuild the economy after covid-19 or any of those things, they are doing it purely for the investment returns.”

Hume subsequently told an Australian Financial Review conference that it was “entirely prudent” for superfund trustees to focus on risk management when making investments, including “non-financial risk via ESG considerations”.