Investing for Australia is a report from the Centre for Policy Development’s Sustainable Economy Program. It follows previous reports and a broader stream of work on the management of climate risk.
The report assesses the Future Fund’s climate risk management using publicly available information.
It uses established tools and compares the Future Fund’s climate risk approach to practices at other institutional investors, including other sovereign wealth funds.
Investing for Australia uses publicly available information and globally accepted tools to assess the performance of the Future Fund on climate risk management. It compares this performance to other institutional investors, including other sovereign wealth funds.
The Future Fund is Australia’s main sovereign wealth fund (SWF).
It invests on behalf of taxpayers.
It gets capital from budget surpluses, and from the sale of Telstra.
In 2022 the Future Fund had nearly a quarter of a trillion dollars under management.
The Future Fund is overseen by a board and it is broadly directed by an Investment Mandate and a Statement of Expectations issued by the Finance Minister.
The Future Fund is required to maximise long-term returns relative to risk, and to adhere to international investment industry best practice.
Investors and company directors manage risk and opportunity, including risks and opportunities relating to climate change
Climate change creates risks for investors and fund managers. Things like:
The Future Fund invests public money. Climate risk in its investments rests with all Australians. It is required to observe international best practice for institutional investors, including in how it manages risk
Disclosure is part of climate risk management. Climate risk disclosure is an established practice for the majority of private fund managers
The Taskforce on Climate-Related Financial Disclosure (TCFD) framework may become mandatory for other market participants in Australia
Investing for Australia uses the ICAP Expectations Ladder – an established industry tool – to assess the Future Fund’s performance on climate risk based on publicly known information.
Investing for Australia finds that the Future Fund has made a partial early stage response to climate risk.
Investing for Australia recommends Parliament:
The Investing for Australia report recommends that this review should consider whether the Future Fund’s Investment Mandate or Letter of Expectations should change to ensure that the Future Fund’s climate risk response is in line with industry best practice.
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