Super risk in climate change

Geelong Advertiser
Page: 27 Friday, 25 May 2007

CLIMATE change is a huge risk not only to the environment but also to superannuation, say industry players. Carbon dioxide (CO2) and its role in climate change have not been more topical, nor more alarming.

Catholic Super chief investment officer Tim Hughes said climate change was the "biggest long-term risk we face", but also presents great possibilities to capture opportunities. Firms want to see a price put on carbon to mitigate some of the risks they are taking. "Climate change is a huge risk to the superannuation industry," Mr Hughes said at a climate change forum in Sydney yesterday.

He said there were weather related risks such as increasing cyclone or hail storms that could affect business productivity. And as most super funds had a large proportion of their savings invested in Australian and international companies, the returns of fund members were linked directly to the long-term financial performance of those investments.

Another major risk was that the government was likely to impose limits on the amount of greenhouse gases companies were allowed to emit. Companies that exceed these limits may pay penalties that could affect their bottom line. These types of risks also posed a threat to superannuation because they could affect a company ’s longterm profitability and, therefore, its share price, which, in turn, had an affect on fund members ’ returns.

Mr Hughes said it was important for superannuation funds to engage corporate Australia to find out their carbon risks and that businesses should be aware of their carbon risk. "Its simple really, ... super funds want to see change," Mr Hughes said. "We don ’t want to wake up one day and see that our portfolios are invalid because (the businesses in which they invest are) so far behind the rest of the world ’s policies. "We want to see a price put on carbon."

The rest of the panel included ABN AMRO ’s director financial markets Craig McBurnie, lAG ’s sustainability research manager Elayne Grace, AMP Capital senior analyst Ian Woods and Origin Energy communications and government relations manager Tony Wood. Origin Energy’s Mr Wood said emissions trading produced a least cost pathway for business to reduce their greenhouse output.

Mr Wood presented a package of proposed action that included a long-term emissions target in line with global action, market-based carbon pricing scheme introduced from 2010, funding for research and development of low and zero emission technologies and more focused support for renewable energy projects. AMP ’s Dr Woods said there was already a significant market for carbon trading, with 374 million tonnes of Co2 traded in 2005 under the Kyoto Protocol.