The Annual Superannuation Performance Test (the test) was introduced as one of four Your Future, Your Super measures.

It was introduced to protect Australians’ retirement savings by holding trustees to account for the investment performance they deliver and the fees they charge to members. 

Treasury is canvassing a range of options for reforming the test, should the government decide to do so in the future.

In considering improvements to the performance test, the government is focused on ensuring the test holds trustees to account for delivering the best financial outcomes for members.

There is now a clear and timely opportunity to align the Superannuation sector to our Sustainable Finance Strategy and developing sustainable finance policies for 1.5°C pathways, to turbo charge Australia’s ambition to become a green ‘superpower’.

This can be achieved through simple amendments to the performance test, using a multi-metric framework 3b. Targeted three-metric option.

Climateworks recommends that:

  • Treasury endorses the ‘Column B’ list of net zero 1.5°C-aligned indices across all asset classes within the current performance test benchmarks.
  • A carve out is available for climate-aligned investments that do not have a clear benchmark.
  • A clear warning label is included within member reporting for all superannuation funds that have significant exposure to climate risks.

The performance test aims to safeguard Australians’ retirement savings by holding trustees accountable for investment performance and fees.

Whilst the performance test has been largely successful in its primary objective, serious unintended consequences have emerged, leading to a large shift in investment strategies that have sidelined climate investment within the $3.6 trillion superannuation industry. This needs to change.

All evidence indicates a genuine desire within the superannuation sector to seize the opportunities presented by the climate investment wave.

Every effort must now focus on eliminating any obstacles to this goal. The first of these is to include climate-aware indices in the performance test.

Whilst the performance test has been largely successful in its primary objective, serious unintended consequences have emerged, leading to a large shift in investment strategies that have sidelined climate investment within the $3.6 trillion superannuation industry. This needs to change.

All evidence indicates a genuine desire within the superannuation sector to seize the opportunities presented by the climate investment wave.

Every effort must now focus on eliminating any obstacles to this goal. The first of these is to include climate-aware indices in the performance test.