Climate risk is now a financial risk super funds can’t ignore
Climate change is reshaping balance sheets. For super funds, ignoring these risks means eroding returns and failing fiduciary duty to members.
Earlier this month, Australia’s first National Climate Risk Assessment (NCRA) put hard numbers on the damage a warming world will do to lives, property and the economy.
For superannuation funds, the implications go beyond compliance. Climate risk is financial risk, and without better measurement and disclosure, trustees risk eroding member returns. The assessment should be compulsory reading for anyone managing other people’s money. It is not a work of speculation. It is a ledger of losses already materialising in the economy.
The numbers are stark. If global temperatures climb by three degrees, Sydney could face more than 300 coastal flooding days a year, compared with just over 30 now. Heat-related deaths could surge more than 400%, reaching about 450 annually by the end of the century. In Melbourne, the increase is more than 250%.
Alongside these human costs are enormous financial ones. The cost of natural disaster recovery in Australia is projected to hit $40 billion annually by 2050 — even under a 1.5-degree scenario. Analysts warn of more than half a trillion dollars in lost real estate value by 2050 if climate risks remain unmanaged.
