Australia’s super nest-egg could deliver 100% renewables by 2030

A new report has revealed the potentially game-changing role Australia’s trillion-dollar pool of retirement savings could play in fast-tracking the shift to renewables.

The research, conducted by UTS Institute of Sustainable Futures (ISF) and Future Super, suggests that an investment of just 7.7 per cent of the nation’s collective superannuation nest-egg, could underwrite the transition to a 100 per cent renewable electricity grid by 2030.

An investment of 12.4 per cent a year, meanwhile, would fund the full decarbonisation of the entire energy system by 2050 – including transport and industry.

The report, which was commissioned by Future Super and 360.org, builds on the work of the ISF 2016 renewables study, which outlined an advanced scenario for Australia.

It says that a transition to 100 per cent by 2050 was both technically and financially viable, not to mention “vital for a safe climate future.” Similar views have been made by network operator Transgrid, and by in depth reports by the CSIRO and the networks lobby.

This new report puts the cost of shifting Australia to 100 per cent renewables by 2050 at around $788 billion – $2bn less than in 2016, but still no small amount.

That is, until you compare it to the volume of funds projected to be under management in super funds by 2050, which is somewhere around $6.5 trillion, up from $2.6 trillion today.

As for the benefits to super fund members, the report assumes a return on investment of 7 per cent to effectively fund the deployment of renewable energy infrastructure and fuels needed to replace fossil fuel energy sources in Australia’s electricity, transport, industrial and primary energy sectors.

But it also notes that this assumption on ROI is conservative, considering renewable energy assets are “routinely delivering” returns of around 10 per cent.

“Australia’s superannuation funds could play a key role in underpinning future growth in clean energy technologies and capture the value in renewable energy infrastructure growth for their members,” the report says.

But Simon Sheikh, who co-founded Future Super as part of the fossil fuel divestment movement, warns that window for Australian super funds to invest in the booming Australian renewable energy market will not stay open indefinitely.

“Superannuation is such a long-term investment, it’s important to capture the first mover advantage,” he told RenewEconomy.

“And as Al Gore said overnight, sustainable investing is the ‘single largest investment opportunity in history’,” Sheikh said.

“It’s an important investment, and the rationale behind the report is to show super funds that they really have to change their approach.

“Government settings have a role to play, too, and as they stabilise we’ll see more capital tipped into renewables.

“The question for Australia,” he added, “is where will that capital come from? Will it come from Australian investors, or will it come from offshore?”

For his part, Sheikh is hoping to get the ball rolling with the launch of a new, renewable energy focussed option via Future Super.

The Future Super Growth (Renewables Plus) product, which will launch on May 8, will give an industry-leading 20 per cent target allocation to renewable energy, on top of its zero investment in fossil fuels.

“By excluding fossil fuels and increasing the allocation to renewable energy and climate solutions, our new investment product empowers everyday Australians to bypass political inertia and invest more of their super in sustainable, future-focussed businesses,” he said.

“The vast majority of Australians want a renewable energy powered society.

“Now, thanks to UTS research, we know how achievable this is – just a small portion of Australia’s collective super savings could completely fund our country’s transition to 100% renewable energy.”

Sheikh says he thinks there will be plenty of demand for a fund that not only excludes fossil fuels, but supports the roll-out of renewable energy – and not just among the environmentally minded.

“When we started Future Super, we started it as part of the divestment movement,” he told RE. “But over the years it has become clear that the same audience had interest in building the clean energy economy.”

The fund is also aiming to appeal to the increasing number of people working in the clean energy sector in Australia.

“We’re very hopeful that there’ll be a lot of demand for this particular product from the industry itself,” he said.

As for the make-up of the fund, Sheikh says it will target 20 per cent of renewable energy across multiple asset classes, gradually building Future Super’s exposure to debt opportunities and listed equity opportunities.

“On the unlisted equity side, it will be heavily skewed to solar,” he said, noting that there will also be particular markets they can target, such as those states in Australia yet to have a lot of investment in renewables (like New South Wales).”