The country’s largest super funds have increased their holdings in coal, gas and oil companies developing new infrastructure. The aim is to deliver consistent long-term returns for members, but this move raises questions about climate commitments and could lead to both regulatory and reputational risks. Analysis reveals that fossil fuel-related holdings jumped to $33 billion by mid-2023, up from $19 billion at the end of 2021. This growth comes amid rising pressure for the sector to align its portfolios with net-zero targets.
Many super funds market themselves as climate-conscious, yet behind the scenes the situation tells a different story. A Market Forces review of 30 major superannuation options shows that fewer than a third reduced exposure to the world’s 200 largest fossil fuel developers. This group includes major Australian firms like Woodside and Santos as well as international companies such as Saudi Aramco and India’s Adani Group.
Instead of divesting, funds have continued to raise their stakes in companies expanding fossil fuel operations, even as regulatory penalties for greenwashing and misleading claims increase. Some of the funds that were penalised millions by financial regulators for marketing portfolios as sustainable are the same ones expanding fossil fuel investments. The regulator has identified greenwashing as a key enforcement focus.
The widening gap between climate-focused marketing and actual portfolio allocations is a growing concern. Organisations that promote net-zero plans may be increasing their exposure to both financial and environmental risks by supporting industries seen as incompatible with climate goals. Voluntary disclosures have not been enough to close this gap. With mandatory climate reporting set to begin by 2027, funds may be held to more rigorous standards.
Although some of the rising exposure relates to diversified resource companies focused more on metals like copper, rather than thermal coal, the broader trend points to a disconnect between messaging and action. Some funds say they are using their influence to encourage companies to shift toward cleaner models and are offering fossil-fuel-free investment options to members.
As the sector readies itself for more stringent climate reporting rules, scrutiny of super funds’ real investments and their environmental impact continues to grow.
