Australian Super Funds Collaborate with UK Counterparts
Australian superannuation funds have launched a groundbreaking effort to influence policy changes in the United Kingdom. This collaboration aims to reshape UK policies and marks a significant step in the global pension industry as financial markets continue to intertwine.
Last Wednesday, IFM Investors spearheaded a coalition of pension funds urging the UK government to take action on its stalled infrastructure projects, particularly in the area of energy transition.
Clean Energy Blueprint Released
IFM Investors, an asset manager owned by profit-to-member funds, published a clean energy blueprint that outlines 20 recommendations for the UK Treasury. The organization believes these suggestions will help “create a supply of new investable projects.”
Local Australian funds involved in this initiative include Aware Super, CareSuper, Cbus, HESTA, Hostplus, and REST. UK partners in this effort include the Border to Coast Pensions Partnership, the largest defined contribution scheme in the UK, NEST, and the Pensions and Lifetime Savings Association.
Together, these funds manage a combined total of £1.7 trillion.
Initial Engagement with UK Policy Makers
During the latter half of the week, David Whiteley, IFM Investors’ global head of external engagement, conducted briefings with UK think tanks and policymakers. This occurred on the same day as the Starmer government’s International Investment Summit, which is expected to unveil significant policy initiatives aimed at attracting foreign investment in areas such as artificial intelligence, life sciences, and infrastructure.
Whiteley, who previously served as the chief executive of Industry Super Australia, emphasized the need for a practical approach to the blueprint. “The discussions we’ve had since the launch have been all about…how do we get our sleeves rolled up and do something about this [transition challenge]?” he stated.
Key Recommendations for Public Sector Reform
A core recommendation of the blueprint is a reform of the UK’s public sector net debt structure, which currently does not include the value of illiquid financial assets in government investments.
“The Government should account for infrastructure assets more like a long-term investor, and less like a commercial bank holding equity as loan collateral to be sold in a fire sale,” said Gregg McClymont, executive director at IFM Investors, in a media release.
The role of fiscal rules in supporting capital investment has been a topic of ongoing debate in the UK. Whiteley believes that by working collectively, pension funds can amplify their influence.
“Ultimately – say any government is only going to have one approach to dealing with public sector debt, or one approach to contracts for difference, or one approach to planning – if a major group of investors who are very long-term and committed to a particular market are saying, ‘These are the policy settings, we think that would work for us’, that’s a lot more of an effective advocacy strategy than everyone having their own views,” he explained.
Rationale for Engagement in the UK
Whiteley noted that the UK was a logical starting point for this pioneering initiative due to the government’s ambitious goals for financing energy transition projects. Furthermore, Australian funds, including IFM Investors, are increasing their presence in the UK market.
Last year, Aware Super opened a new office in London, marking its first infrastructure deal last month. IFM Investors has also established a strong client base, with around 60 investment professionals working in Europe.
This initiative follows a similar energy transition blueprint IFM Investors released to engage the Australian government in late 2023. When asked about the possibility of expanding this blueprint into other global markets, Whiteley stated he would not dismiss the idea, but emphasized the need for a better understanding of market and regulatory nuances first.
Broader Issues on the Engagement Agenda
In addition to energy transition, social and affordable housing is another significant issue on the agenda.
“There’s seemingly a housing shortage in many countries, so it’s an issue that is relevant to other jurisdictions,” Whiteley noted.
He pointed out that there are opportunities for investment in both energy transition and social housing, which can provide returns for members while addressing the long-term risks of a disorganized transition.
“This collaborative effort aims to generate investment opportunities ultimately for our owners, clients, and their members,” Whiteley concluded.
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