Industry super funds have banded together to develop a blueprint for policy that will facilitate the energy transition and attract investments from funds.
Industry super funds stand ready to invest in Australia’s energy transition, which, in the electricity sector alone, will need an average $12 billion a year between now and 2050 to achieve net zero and transform Australia into a renewable energy superpower.
The cost of decarbonising other sectors of the economy and growing energy-intensive export industries will be more than $40 billion a year, according to a paper published jointly by eight industry super funds and IFM Investors.
Much of this investment will be capital-intensive with long time horizons – a good match for Australian superannuation funds which are able to offer long-term financing, says the paper, titled: “Super-powering the energy transition in Australia: a policy blueprint to facilitate superannuation investment.”
The signatories to the paper – AustralianSuper, ART, CareSuper, Cbus, HESTA, Hostplus, Rest Super, UniSuper and industry super fund-owned IFM Investors – set out three key areas of policy reform that could help scale up investment in Australia’s energy transition.
These are: transmission, battery (storage) and sustainable aviation fuel.
In the paper, the super funds have laid out a blueprint that would help pave the way for super savings to flow into energy transition initiatives and, at the same time, generate a return to fund members.
“Superannuation funds have to act in the best financial interests of members. With the right policy settings and a pipeline of investment opportunities, superannuation can be a significant source of capital for the Australian energy transition, helping workers achieve a dignified retirement in a more sustainable world,” says the paper.
Industry superannuation funds have been investing in infrastructure since the 1990s, with a track record of investing in businesses delivering essential services to the community.
“Industry superannuation funds own strategic infrastructure assets that will be needed to support net zero export industries, such as seaports, airports and connecting rail,” says the paper.
“We also own and engage with some of the largest energy and resources businesses in Australia through listed equities investments, with superannuation funds holding over a third of the Australian Stock Exchange by market capitalisation.”
Achieving our net zero target will take bold and decisive action from governments, industry and investors.The challenge we face is not a lack of capital, but a shortage of good quality investment opportunities. Collaboration across all sectors of the economy, underpinned by policy certainty, will deliver the outcomes we need to respond to this challenge and deliver better outcomes for all – Paul Schroders, AustralianSuper
Paul Schroder, Chief Executive Officer (CEO) of Australian Super says: “AustralianSuper is a long-term investor in the Australian economy, and is committed to investing in the nation’s energy transition while delivering on our purpose to help members achieve their best financial position in retirement.
“Achieving our net zero target will take bold and decisive action from governments, industry and investors.
“The challenge we face is not a lack of capital, but a shortage of good quality investment opportunities. Collaboration across all sectors of the economy, underpinned by policy certainty, will deliver the outcomes we need to respond to this challenge and deliver better outcomes for all.”
Ian Patrick, Chief Investment Officer (CIO) of Australian Retirement Trust (ART), says: “We believe the blueprint supports our view of approaches needing to be long-term, pragmatic, measured and actionable; it is important to manage climate risk while safeguarding and growing the retirement savings of our members.”
Suzanne Branton, CIO of CareSuper, says: “The national transition to cleaner energy presents a wealth of investment opportunities for super funds and their members, and CareSuper supports this collective initiative. By investing in the energy transition today, we are supporting the economy of tomorrow.”
Brett Chatfield, CIO of Cbus Super, says: “Expansion of the Commonwealth Government’s Capacity Investment Scheme is a key initiative to address the urgent need for energy transition in Australia.”
Debby Blakey, CEO of HESTA, adds: “Australia stands poised to become a global leader in energy transition, given our large pools of patient, sophisticated capital. HESTA has committed to invest 10 per cent of its portfolio in climate solutions by 2030.”
David Elia, CEO of Hostplus, says: “As we navigate a path to a sustainable energy future in Australia, the right investment settings will allow us to steer funds towards projects that ensure both sustainability and financial prosperity for our members, standing resilient amid global capital dynamics.”
Andrew Lill, CIO of Rest Super, says: “This blueprint charts a path to decarbonise the economy, achieve net zero objectives and enhance the financial interests of our members.”
And John Pearce, CIO of Unisuper, says: “UniSuper is committed to Australia’s energy transition. We believe that supportive policy settings will open the door to investment opportunities needed to achieve a net zero economy while prioritising the best financial interests of our members.”
“We believe in the right policy settings,” says David Neal, CEO of IFM Investors. “Superannuation capital can be increasingly deployed at scale to super-power the energy transition in Australia. This blueprint sets out a path to help ensure the growth of industry super funds is harnessed for Australia as the transition to net zero continues to ramp up globally.”
Origin Energy
Coincidentally, the rationale behind what was a very public battle to keep Origin Energy in Australian hands, led by AustralianSuper, was a conviction that Australia has the capital to work with Origin in its transition to clean and renewable energy.
The key selling point of the takeover bid from Brookfield Asset Management and US private equity firm, EIG, was the commitment to support Origin’s plan to construct up to 14 GW of renewable energy generation and storage facilities in Australia over the next decade.
AustralianSuper was clearly of the view that the capital to fund Origin was available in Australia without losing ownership of a key energy player to foreign ownership. AustralianSuper alone had net inflows of $22 billion last year.
“Brookfield isn’t the only player that can finance Origin as it transitions to net zero,” quipped a super fund source.
The bid failed on Monday, as 67 per cent of shareholders voted in favour of the deal, yet it required the support of 75 per cent to be successful.
Australia stands poised to become a global leader in energy transition, given our large pools of patient, sophisticated capital. HESTA has committed to invest 10 per cent of its portfolio in climate solutions by 2030 - Debbie Blakey, HESTA
Industry super funds manage about $1.2 trillion, and are expected to more than double that amount to about $3 trillion by 2030 – this growth occurring at a time when there is global competition for capital.
Governments across the world, including the United States, the United Kingdom and in the European Union, are introducing incentives to attract investment in clean energy at scale to turbocharge the energy transition, notes the paper.
As a result, capital from industry super funds is being directed to energy transition projects in jurisdictions where it can generate stronger risk-adjusted returns for the working people the funds represent.
One example came in November when Australian super funds pledged $29 billion in capital to the UK to invest in energy transition projects there. Aware Super committed $10 billion to the UK’s energy transition while other funds pledged £10 billion ($19bn) through their collective investment vehicle, IFM Investors.
Over time, Australian super investments have gone into clean energy and related businesses, such as wind and solar generation, transmission and distribution, batteries, hydrogen and district heating, across the UK, Europe and the US.
Since the launch of its Inflation Reduction Act just over a year ago, the United States has seen eight years’ worth of new clean energy investment flow in, equivalent to more than US$270 billion.
Other jurisdictions, including the European Union, Canada and Korea, have announced or are developing significant policy packages to support investment in clean energy and associated technologies. Since 2020, these governments have allocated US$1.34 trillion for clean energy investment support.
The super funds say Australia can’t afford to be left behind.
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