Trustees can’t ignore ESG

Australian superannuation fund trustees may need to start considering the impact of climate change on their investments, according to BNP Paribas Securities Services managing director, David Braga.

Pointing to a recent US Supreme Court ruling that held that trustees have a fiduciary duty to monitor fund investments including with respect to the impact of climate change, Braga suggested there were potential implications for Australian super fund trustees.

"Sustainability risk is rapidly becoming one of the pillars of risk measurement and management alongside more traditional pillars of market, credit, and liquidity risk," he said.

Pointing to recent research conducted by BNP Paribas Securities Services with the Australian Institute of Superannuation Trustees (AIST), Braga said almost two-third of fund trustees expected the role of environmental, social, and governance (ESG) to increase in the industry.

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He also noted recent decisions by institutional investors in Australia to reduce investments in companies they believed contribute to global warming and suggested these various moves were all putting pressure on asset managers and owners to better understand, analyse and modify their holdings to be acceptable to investors.

"This pressure then flows through to the underlying information providers such as the custodian," Braga said.