Australia’s Local Government Super fund, which manages $8 billion in superannuation assets for 90,000 members, has been ranked first in a global index rating asset owners on how they manage climate change risk.
The Global Climate 500 rates the world’s largest asset owners — pension funds, insurance funds, sovereign funds, foundations and endowments — on how they manage climate risk.
The index is part of the global Asset Owners Disclosure Project which was pioneered in Australia by the Climate Institute.
Peter Lambert, CEO for the past seven years of Local Government Super, says his fund stopped investing in companies with more than one-third of their business in fossil fuels from November last year.
“We get a range of members who are every vocal in support of what we do and we get a very small number who question it,” he told Business Insider.
“Our fundamental requirement is member returns and if we feel that this was negatively impacting those returns them we would reassess what we do.
“But we feel that you can get good returns and still be a responsible investor.”
The funds returns are good. Over the last year, the balanced option has returned 12.44%. Membership is mostly those who work in local government but the fund will accept anyone’s super contributions.
Green investing is growing in Australia with Sydney University announcing in February that it will cut its carbon footprint by divesting fossil fuel investments over three years. The ANU in Canberra dumped $16 million in oil and mining stocks last year.
One other Australian fund, AustralianSuper, got a AAA rating and a place in the global top ten:
The Local Government Super reached the top of the index because it can calculate its portfolio-wide carbons emissions, something that only 7% of the world’s top 500 assets owners are able to.
The fund had the widest range of climate change-related portfolio risk mitigation actions of all of the asset owners, including: providing guidance to fund managers; putting a climate risk overlay on the core portfolio; underweighting carbon-intensive stocks and sectors; and using divestment and negative screens in certain sectors.