Net zero, housing and defence loom large for super funds and banks

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Billions of dollars held by superannuation funds could be sunk into slashing greenhouse gases or boosting housing supply, while small businesses could find it easier to win lucrative Defence contracts as the federal government seeks to drive more investment into key parts of the economy.

Representatives from super funds with $2.5 trillion in holdings, the nation’s biggest banks, the clean energy sector, defence companies and the philanthropic sector met Treasurer Jim Chalmers and other senior government ministers on Tuesday to come up with new ways to lift investment in areas short of capital and financial support.

Industry funds are looking for tax incentives that could enable them to invest in transmission lines.Credit: Luis Ascui

Chalmers signalled possible changes to the performance test against which super funds are judged every year, after complaints from the sector that the current rules were so narrow that they prevented investments in high-yielding parts of the economy.

Several super funds brought up the test and the way it might be working against investment in areas such as net zero technology and the housing sector.

The treasurer said while the performance test had played an important role in boosting returns for super funds, it had to be fit for purpose.

“We need to make sure that that is designed in a way it’s intended to, and in a way that doesn’t deter investment in important areas,” he said.

Industry super funds also used Tuesday’s meeting to press for broader financial reforms they believe could substantially boost their investment in areas such as new electricity transmission lines, batteries and sustainable aviation fuel.

They argue new ways to enable investment would help super funds support the expected 10,000 kilometres of transmission lines that are forecast to be needed by 2050.

This could include concessional finance or direct payments that would ensure super funds delivered sufficiently high investment returns to their members while putting downward pressure on costs to consumers.

Chalmers said the government would consider the proposals.

AustralianSuper chief executive Paul Schroder says governments, investors and businesses will need to take bold and decisive actions to meet the country’s net zero ambitions.Credit: Eamon Gallagher

“We think it’s unlikely that a government could do all of those things they have proposed, but it might be possible for us to do some of them after we carefully consider it,” he said.

AustralianSuper chief executive Paul Schroder said bold and decisive action from governments, industry and investors would be needed for the country to reach net zero emissions by 2050.

“The challenge we face is not a lack of capital, but a shortage of good quality investment opportunities. Collaboration, ambition and action across all sectors of the economy, underpinned by policy certainty, will deliver the outcomes we need to respond to this challenge and deliver better outcomes for all,” he said.

But shadow treasurer Angus Taylor said the government had already faltered by failing to include nuclear power, and carbon capture and storage, in its green bond program, which will start next year.

He said this meant technologies that could reduce Australian emissions would not have the same access to finance as in countries such as the UK, Canada and the United States.

“We need technology neutrality when it comes to tackling climate change and bringing down power bills. Instead, every decision this treasurer makes adds higher prices for Australian businesses and families,” he said.

Defence is another area of investment opportunity for major funds and small businesses, with the government agreeing to identify emerging businesses needing private-investor support to supply the Department of Defence.

Private investor funds might also be able to sink cash directly into defence infrastructure and technologies, and Defence Industry Minister Pat Conroy said the finance sector also could play an important role in boosting Australia’s defence capability.

“Importantly, the discussions held today also pave the way for institutional investors … to be involved in the production of world-class defence technologies and platforms, presenting an opportunity for everyday Australians to have a stake in the defence of their nation,” he said.

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