Australian super fund Local Government Super has ranked second globally for its sustainable investment practices and maintained its AAA rating, according to a global survey of the world’s top-ranked green investors.
The Climate Institute’s Asset Owner’s Disclosure Project (AODP) – chaired by former Liberal Party leader Dr John Hewson – assesses how 458 of the world’s biggest investors, including many pension funds, are managing the risks and opportunities associated with climate change.
At the launch of the Global Climate Index 2013-2014 survey in Sydney yesterday, Hewson said a ‘hypocrisy index’ would be appropriate as many big super funds fail to demonstrate transparency in reporting climate change risk they demand of the companies they invest in.
AODP surveyed the top 1,000 super funds, pension funds, insurance companies, sovereign wealth funds and endowment funds, which control around US$70 trillion worth of assets and own more than 50% of the world’s stock exchange listed companies.
Of the 1,000 funds surveyed, 460 were rated but only five funds – less than 1% – were AAA-rated.
But LGS – which manages over $7.5 billion in superannuation assets for around 90,000 members – sees climate change as the most important environmental, social and governance (ESG) risk, said chief executive Peter Lambert.
Over $4.2 billion – more than half – of LGS’s total assets are invested in responsible strategies. This includes responsible options across multiple asset classes such as Australian and international shares, property, absolute return, private equity and fixed interest.
Last year LGS launched its Sustainable Australian Shares investment option, which excludes investment in companies that derive revenue from activities in armaments, gambling, uranium mining and nuclear, old growth logging, tobacco, coal mining and questionable environmental, social or corporate governance practices.
“We are doing all we should to secure our members’ financial futures by investing sustainably. This requires us to remain open to new innovations that continually improve ESG performance,” Lambert said.
“Building more sustainable investment portfolios involves not only investment per se, but also a commitment to ongoing transparency about the impact of these investments and active participation as asset owners.”
The AODP is an independent global not-for-profit organisation whose objective is to protect members' retirement savings from the risks posed by climate change. It helps funds redress the huge imbalance in their investments between high-carbon assets making up 50-60% of a portfolio, and low-carbon assets which are typically less than 2%, and realigning to adopt long-term investment practices.
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