Left to right: John Connor, Climate Institute; John Hewson, Asset Owners Disclosure Project, Blair Palese, 350. Org; Bill Hartnett, LGSA

12 December 2013 — The investment industry is capable of leading the transition to a low carbon world, but the majority of the world’s players are acting contrary to the interests of those whose money they represent, the latest Asset Owners Disclosure Project’s Global Climate Index has found – though perhaps not for long.

The AODP is a not-for-profit global organisation with the objective of protecting superannuation and pension fund members’ savings from climate change risk. Their annual Global Climate Index takes data from the 1000 largest asset owners managing more than US$70 trillion – including pension and superannuation funds; insurance companies; sovereign wealth funds; and foundations, endowments and trusts – and ranks them based on five key aspects: transparency, risk management, incentive chain alignment, active ownership and low-carbon investment.

The report was released alongside The Climate Institute’s Climate Smart Super: Understanding Superannuation & Climate Risk report, a how-to guide with simple steps to assist people to engage with their superfunds, and move from “accidental to active” investors.

Chair of AODP, former Liberal leader Dr John Hewson, said that since AODP launched its first index in December last year, civil society organisations had successfully begun to question “the legitimacy of an industry that is supposed to manage key long risks on behalf of its beneficiaries”.

Unfortunately, he said, “an alarming number of asset owners still pin most of their long term risk strategies on a financial marketplace that has become infamous for its short termism.”

Dr Hewson said things were changing, however, and that in 2014 the industry would be “smoked out of its fiduciary duty bunker” and would have to prove to members it was acting to address the “calamitous systemic risk” that climate change presented.

The results of this year’s survey do not provide much comfort, though.

Only five out of the 458 asset owners ranked this year received the highest AAA rating (two Australian super funds met muster, Local Government Super and VicSuper, ranking 2 and 5 respectively). If all funds were AAA rated, the report stated, climate change would have been solved.

80 per cent of asset owners assessed by the project were either D rated (abysmal) or X rated (doing absolutely nothing).

“A majority of the world’s investment industry are clearly acting contrary to the interests of those whose money they represent –  this is an outrageous situation,” AODP board member and general secretary of the International Trade Union Confederation Sharan Burrow said. “It must be remembered that much of the money being held by these organisations is the product of workers’ lifelong savings.”

While the results were bad, there were still more funds leading on climate than there were countries, the report stated.

“What we’re seeing ever more clearly is that the polarisation between leaders and laggards within the industry is accelerating and that the investment community is moving towards change more rapidly than most of our political leaders,” AODP executive director Julian Poulter said.

The report can be accessed here.