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$73 trillion by 2025: The investment change you need to make

·Personal Finance Editor
·3-min read
Operations at a coal mine. A person checking investments on a tablet. $100 notes fanned out.
Aussie super funds are continuing to invest in fossil fuels and it could be risking our retirement savings (Source: Getty)

Australia’s superannuation industry is worth a massive $3.1 trillion, and every Aussie’s retirement depends on its success.

That said, many of the major funds are invested in something that will eventually become a thing of the past - fossil fuels.

In the wake of the shocking International Panel on Climate Change (IPCC) report which predicted a devastating future if we stay on the same path, we now need to ensure the safety of our retirement savings.

Bloomberg estimates that the global ESG (environmental, social and governance) sector could be worth as much as $73 trillion (US$53 trillion) by 2025.

Asset manager campaigner at Market Forces Will van de Pol told Yahoo Finance Australian super industry has not been doing enough.

“Australia's superannuation sector is only making incremental progress on climate action. It is not taking action at the scale or pace required to play its role in avoiding the worst impacts of climate change,” he said.

“Every major super fund in the country is still investing in companies that are undermining the climate goals of the Paris Agreement by expanding the scale of the coal, oil and gas industries.”

This means that the majority of our superannuation funds continue to invest Aussies retirement savings into companies actively pursuing major fossil fuel projects.

This is despite climate science telling the world there is no room for these investments if we want to limit warming in line with global climate goals, van de Pol said.

“Even coal mining companies like Whitehaven and New Hope enjoy the financial backing of many super funds, despite their business plans being consistent with the abject failure of the Paris Agreement,” van de Pol said.

ESG investments perform better

There have been numerous studies now which have proven that sustainable investments have outperformed non-sustainable ones.

Earlier this year a study by New York University (NYU) found that ESG investment strategies perform better than negative screen approaches and ESG investing provides good protection, especially during a social or economic crisis.

“Many studies have shown coal, oil and gas companies have underperformed the market over the last decade,” van de Pol said.

“Yet these companies are trying to increase production when we know demand must fall in order to meet global climate commitments.”

Which funds are meeting climate goals?

Despite almost all funds continuing to fund the fossil fuel industry, there are some who have been moving in the right direction.

There are a handful of ethical super funds in Australia which exclude any investments in fossil fuels, which are:

  • Australian Ethical

  • Future Super

  • Cruelty Free Super

  • Verve Super

Suncorp has announced a plan to phase down its investments in oil and gas production to zero by 2040, while NGS Super's target to achieve a carbon neutral portfolio for the entire fund by 2030 will also see it divest from oil and gas companies.

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