Aussie super funds co-author blueprint for ‘pro-investment’ policy in UK

Local super funds want to play a role in decarbonising the UK economy and investing in the industries that will drive future growth, jobs and innovation.

Some of Australia’s largest super funds have co-authored a new landmark blueprint, in partnership with UK pension funds, recommending policy action to unlock pension capital as part of the UK delivering on its clean power by 2030 mission.

Namely, Aware Super, CareSuper, Cbus Super, HESTA, Hostplus and Rest are signatories of the blueprint, Mobilising pension capital for net zero: a policy blueprint for the UK, which has been led by pension fund-owned asset manager IFM Investors.  

The UK government has made clean power by 2030 one of its defining priorities, and intends to work with private sector investors to double onshore wind, triple solar power and quadruple offshore wind over the next six years.

As part of this, the government expects pension funds, both local and globally, to play a major role in financing the wider transition, according to the asset manager.

IFM Investors executive director, Gregg McClymont, said that mobilising pension fund investment has the potential to create benefits for society, but at the same time, they have a fiduciary duty and must only invest in their members’ best interests.

“This world-first collaboration between some of the UK and Australia’s largest funds maps out how the government can accelerate the energy transition and deliver strong returns for working peoples’ retirement savings,” McClymont highlighted.

The blueprint - containing signatories that invest a combined £1.7 trillion ($3.25 trillion) in the UK and abroad - will be launched in Westminster this week at a roundtable event.

Its key recommendation is to reform Public Sector Net Debt (PSND) by including the net worth of illiquid infrastructure investments for the first time. IFM noted that this comes against a backdrop of growing debate about the role of the UK’s fiscal rules in supporting capital investment.

“There are a number of steps to unlocking this investment. But a prerequisite is that the government should account for infrastructure assets more like a long-term investor, and less like a commercial bank holding equity as loan collateral to be sold in a fire sale,” McClymont added.

As such, reforming the fiscal rules to “treat unlisted productive assets as an asset”, according to IFM, will help incentivise long-term public investment in the net zero transition, creating the conditions for Great British Energy (GBE) and the National Wealth Fund (NWF) to crowd in pension capital at scale.

Other key recommendations include incorporating the government's emissions reduction targets in the National Planning Policy Framework, fast-tracking the deployment of renewable energy and supporting industrial decarbonisation and emerging net zero industries.

“As a large global institutional investor, Aware Super can offer economies, including the UK and Australia, a valuable source of long-term and sophisticated capital to help meet net zero emission targets,” Aware Super chief executive Deanne Stewart said.

“These opportunities are also a key contributor to the retirement futures of our 1.1 million members – which include nurses, teachers, police and other essential workers.

“The enormous scale of energy transition and need for private sector capital should enable appropriate opportunities for generating strong, risk-adjusted returns for their investment portfolios, as well as strengthening the communities in which they live, work and retire.”