Superannuation is the ultimate long-term investment. So, it probably makes sense for those who manage our retirement savings to scan the horizon for risks that could arise several years, even decades, into the future.
Climate change is one such risk. That's why more and more funds are building it into their thinking for how they manage all members' money, not just those who have chosen an "ethical" investment option.
So, how might climate change affect investment returns? And what can members do about it?
It is now being accepted by more big investment managers that carbon-intensive assets making good returns today could plunge in value in the future because of climate change.
This is known as the "stranded asset" theory. The argument goes that financial returns might be hit by extreme weather, policy changes or technological advances caused by climate change. For example, fossil fuel producers may be hurt by carbon prices squeezing profit margins, or customers switching to other types of energy.
It makes sense for investors to be thinking about how they might manage these risks, before they materialise.
First State Super, one of the biggest funds in the country with more than $50 billion in assets, is one fund that is putting all of its assets under the climate change microscope.
Head of research Ross Barry says one part of its strategy has been to launch a "deep dive" of its investments, including property, shares, and infrastructure.
He stresses that managing climate change risks does not need to mean divesting from carbon-intensive assets – that is a "last line of defence". Its approach is to first engage with the companies the fund holds shares in, and determine if they too are thinking about the risks from climate change.
"It's about trying to identify what those risks are, and work out where we might have a material exposure that we may not want to have," he says.
Barry says there are signs climate change has already started to have an impact – pointing to insurance companies saying there are more frequent extreme weather events. Others point to the plunge in coal miners' shares – a sector where some funds are cutting their exposure altogether.
However, it is up to funds to decide how they respond, and not all of them have clear public strategies for climate change risk.
The Asset Owner Disclosure Project, which ranks big global funds on how they are responding to the risk of climate change, found Australia had a relatively high proportion of asset managers that received positive ratings.
But the Climate Institute's manager investment and governance, Kate Mackenzie, says there are still a few super funds "that don't appear to be looking at this issue at all, as far as we can see".
"No one wants to find that they are invested in Kodak just before it went into bankruptcy because it didn't respond appropriately to digital photography. That's the kind of thing that prudent asset managers would be looking out for," she says.
Some of the most powerful people in global finance also say these risks need to be looked at. Bank of England governor Mark Carney, who has said there are "huge" financial risks from climate change, this month said about a third of the world's 1000 biggest companies were not revealing enough information about their carbon exposure.
Anyone who is concerned about how their super fund is managing these risks should ask for information from their super fund.
