RIAA supports the Government reviewing the framework of the performance test and welcomes the breadth of consultation undertaken. Whilst RIAA supports the use of a performance test to help safeguard the retirement savings of Australians, RIAA agrees with the Government that the current performance test has had the desired effect to remove underperforming funds. However, it has also had unintended consequences which has disincentivised the superannuation sector from long-term decision-making, taking advantage of investment opportunities in new and emerging sectors and being able to adapt to a changing future: one where a focus on decarbonisation and transitioning to a net-zero economy is crucial. The proposed review of the performance test aligns with RIAA’s position that a whole-of-government approach to sustainable finance is required.
Responsible investment approaches as a whole have been shown to lead to improved risk/return outcomes. There are a number of super funds which implement market-leading approaches to responsible investment through default MySuper products and pass the current performance test, including organisations that have been named as Responsible Investment Leaders by RIAA. There are also a number of different views across industry regarding the appropriate approach (if any) to amending or replacing the performance test, including among RIAA’s 500-strong member base. However, through wide consultation and engagement with funds that pursue different strategies and approaches, and considering the importance of a joined-up policy response to both the climate change crisis and transitioning the Australian economy to net-zero, as well as RIAA’s mission, RIAA is of the view that the current performance test to constitute a regulatory barrier which is, at present, disincentivising the superannuation sector to invest outside of a limited universe that tracks carbon intensive benchmarks.
RIAA has:
- recommended the Government establish an independent multi-disciplinary oversight body (of industry and technical experts) to ensure the ongoing relevance of the performance test and that it remains fit-for-purpose into the future;
- a set of key principles to guide the selection of a new test; and
- commented on the design options set out in the consultation paper.
About the contributors
About the speakers
RIAA supports the Government reviewing the framework of the performance test and welcomes the breadth of consultation undertaken. Whilst RIAA supports the use of a performance test to help safeguard the retirement savings of Australians, RIAA agrees with the Government that the current performance test has had the desired effect to remove underperforming funds. However, it has also had unintended consequences which has disincentivised the superannuation sector from long-term decision-making, taking advantage of investment opportunities in new and emerging sectors and being able to adapt to a changing future: one where a focus on decarbonisation and transitioning to a net-zero economy is crucial. The proposed review of the performance test aligns with RIAA’s position that a whole-of-government approach to sustainable finance is required.
Responsible investment approaches as a whole have been shown to lead to improved risk/return outcomes. There are a number of super funds which implement market-leading approaches to responsible investment through default MySuper products and pass the current performance test, including organisations that have been named as Responsible Investment Leaders by RIAA. There are also a number of different views across industry regarding the appropriate approach (if any) to amending or replacing the performance test, including among RIAA’s 500-strong member base. However, through wide consultation and engagement with funds that pursue different strategies and approaches, and considering the importance of a joined-up policy response to both the climate change crisis and transitioning the Australian economy to net-zero, as well as RIAA’s mission, RIAA is of the view that the current performance test to constitute a regulatory barrier which is, at present, disincentivising the superannuation sector to invest outside of a limited universe that tracks carbon intensive benchmarks.
RIAA has:
- recommended the Government establish an independent multi-disciplinary oversight body (of industry and technical experts) to ensure the ongoing relevance of the performance test and that it remains fit-for-purpose into the future;
- a set of key principles to guide the selection of a new test; and
- commented on the design options set out in the consultation paper.
