Institutional investors and climate change
What role can superannuation funds play in society's response to climate change?
- Dr Anita Foerster (Department of Business Law and Taxation, Monash University)
- Dr Kym Sheehan (Sydney Law School, University of Sydney)
Project background and aims
Since the conclusion of the Paris Agreement in 2015, there has been a very significant shift in the way climate change is framed and understood by business and investors. No longer merely an ethical or corporate social responsibility issue, climate change is now widely recognised as posing financially material risks. Equally, business and investors are increasingly cast as critical actors in society's response to climate change. If sustainability is integral to investor decision-making on how to construct portfolios and allocate capital, as well as to investor stewardship activities, such as engagement with companies, investors can potentially play a significant role in helping to align capital, resources and economic activity to clean energy outcomes.
Drawing on an analysis of the legal context, prevailing investment theory and practice, as well as the emerging sustainable finance agenda, this project explores decision-making by a group of Australian institutional investors (superannuation funds and fund managers) on climate change. The project seeks to evaluate whether and how this decision-making is changing as a result of the consideration and integration of climate risks; and in turn, whether this is contributing to a shift of capital and resources in ways which support the transition away from a carbon intensive to a clean energy economy.
Combining legal analysis with empirical research, this project takes a law-in-context approach to understanding investor decision-making on climate change. It explores how this decision-making is being shaped by existing legal frameworks which require institutional investors to act in the best interests of beneficiaries and to address sustainability issues where they pose material risks to investments; as well as by dominant approaches to investment practice, which emphasise risk management through portfolio diversification and seek to integrate environmental, social and governance risk considerations into these processes.
Publications relevant to this project
- Anita Foerster, Kym Sheehan, Daniel Parris, ‘Investing for a safe climate’ (20210 44(4) UNSW Law Journal 1409
- Anita Foerster, 'An Australian man successfully sued his super fund over climate risk. Here's what that means for your nest egg' The Conversation (12 Nov, 2020)
- Anita Foerster, 'Climate Justice and Corporations' (2019) 30(2) King's Law Journal, https://doi.org/10.1080/09615768.2019.1645447
- Anita Foerster and Kym Sheehan, 'Investor decision-making on climate change in Australia: an empirical study' presented at the Corporate Law Teacher's Association Conference, 2-4 February 2020, Monash University, Melbourne
- Anita Foerster and Kym Sheehan, 'Empirical insights on investor decision-making on climate change in Australia' presented at the 6th Frontiers in Environmental Law Colloquium, 13-14 February 2020, University of Western Australia, Perth
This project was supported by the Monash Business School New Staff Grant (2019) and a Dept of Business Law and Taxation small research grant (2019).