Generation X can add another entry to their ‘Reasons I Remain Disaffected’ list — the Climate Institute are today warning that there’s a serious risk that delayed action will result in holders of superannuation funds having to work longer or risk running out of money late in life. And Gen X are most at risk — they stand to lose up to $1300 in superannuation for each year of retirement.
Last week head of the Australia Institute, Clive Hamilton, warned that the Australian government’s continued shunning of the Kyoto framework could seriously drive up the costs of carbon permits for the domestic market in the future, with dire economic consequences.
Today the Climate Institute are warning that the Australian government’s insistence on sticking to “long term aspirational goals” instead of setting “decisive shorter term targets” could seriously affect superannuation, especially that of Generation X.
“Because stock valuations are calculated on short term value, no one has looked ahead to measure what impact carbon pricing might have on stock values,” says Climate Institute Chief Executive John Connor. “… If we are forced to take sudden action later, the adjustment in the stock market will adversely effect the superannuation payments of thousands of Australians.”
So why will long suffering Xers suffer most from late action?
“If we don’t take action now, we’ll most likely take extreme and urgent action through the 2020s, to avoid dangerous climate change, which will have a far greater impact than if we get going now,” O’Connor told Crikey.
The timing means that “poor Gen X get done over again. But Gen Y shouldn’t start counting their nest eggs…” because agencies such as Goldman Sachs, JB Were and AMP Capital, which have put together this modelling, have been very conservative — “they haven’t factored in the costs of impact of climate change” on top of super pain.
The modelling examines the data collected by the 44 Australian-listed companies that participated in the 2006 Carbon Disclosure Project and the likely impact of future carbon prices on company value. According to the Climate Institute, these companies represent over 80% of the ASX100 by market capitalisation.
Jason Clarke, Chief Operating Officer for SuperRatings, told Crikey, “as we saw in June and July a reduction in share prices certainly affected super balances” but “a sudden and sustained drop in share values due to carbon pricing could certainly have a more significant negative impact on super balances.”
“Many super funds have started to address the issue and there is currently significant momentum gathering behind sustainable investing as more and more people start demanding greater accountability of how their hard earned super contributions are invested,” says Clarke.
“For example, an increasing number of funds are becoming signatories to the United Nations Principles for Responsible Investing bringing a new level of environmental, social and corporate governance (ESG) considerations into investment analysis and decision making processes.”
The Climate Institute have created a super calculator. Key in your details for the dollar impact on your retirement.