Having just stepped down after 12 years at the head of building and construction industry superannuation fund Cbus, former CEO David Atkin hasn’t been spending his time at the beach. A family trip to Queensland was cancelled due to Covid-19 movement restrictions, although he did have time to spend time with his wife and daughter (his two stepsons have long left home), and get back into his neglected passion for long-distance running.
But things didn’t slow down for long. News broke on December 2 that he had stepped into embattled funds manager AMP Capital as deputy chief executive officer, assuming operational leadership of AMP Capital temporarily while the search for a permanent chief continues due to the demotion of Boe Pahari.
He was also last month brought on to the board of the Australian Climate Council, adding to a long list of high-level voluntary commitments which include steering committee member of the Australian Sustainable Finance Initiative, sitting on the advisory council working on the Global Pension Transparency Benchmark initiative, and vice chair of the Business Reporting Leaders Forum promoting integrated business reporting in Australia.
It’s a heavy workload, but it all comes from a desire to push the financial world towards longer-term decision making. “Whether it’s climate change, the governance of the organisations we invest in, or the way organisations understand their social license to operate, all these things can materially impact investment returns, in my experience,” Atkin says.
In the years to come, Atkin is keen to provide advisory services to industry assisting organisations integrate sustainability into the way they develop their strategy and execution programs. “That’s the area I really want to work in,” he says.
Integrated reporting in particular has been a passion of his for some time. A robust assessment of how an organisation’s strategy and governance creates value over the short and longer term, Cbus has been part of the Global Pension Network for Integrated Reporting since 2013, and was the first fund in Australia, and the third globally, to obtain limited assurance over its 2019 annual report to give confidence it was prepared according to the Integrated Reporting framework.
Integrated Reporting is a big ask of the industry, Atkin admits. It requires sustained effort over time alongside the many other challenges funds are dealing with. But funds with their glowing clout need to recognise they have a multitude of stakeholders, and integrated reporting is taking up the challenge of bringing all of them onto the same page and balancing their interests in a transparent way.
It is also, like it or not, the way the industry is going, he says. “There are a lot of pressures at the moment around the need to improve transparency in the industry,” Atkin says. “So my call to the industry is get in front of it rather than having it imposed on you, so industry can shape it and meet the industry’s needs rather than have it forced by regulation. Either way, mandatory sustainability reporting is coming.”
Common sense regulation
But while asserting Cbus has always “fronted into regulatory change” and that he welcomes legislation that pushes Australia’s superannuation system to operate at a very high standard, he says each wave of reform needs to be carefully managed so its impact can be properly understood before it is implemented. This hasn’t been the case in recent years, he says.
“What we’ve seen in the last two to three years in particular are changes imposed on the industry without a lot of consultation, if any consultation, and then really having to implement them in very short timeframes,” Atkin says.
Some of the most recent announcements particularly concern him. It is is a good aspiration to improve efficiency and protect consumers from poorly performing funds, but the federal government’s proposed annual performance test for superannuation funds–where those that fail will be blocked from accepting new members–will potentially create an uneven playing field where not all parts of the sector are treated the same way, he says.
The fact administration fees will not be included in the test, along with the risk funds invested in unlisted assets or active management could be unfairly penalised, are particular points of concern.
“These are all solvable – through good consultation, an effective listening process and if everyone comes to the table with the right frame of mind,” Atkin says. “But there are risks here that if you play it all out you could see everyone hugging the benchmarks, people getting out of active management, out of unlisted, and members seeing anodyne investments as a consequence.”
The proposal to ‘staple’ funds to members rather than automatically create a new account with a new job will also put at risk the insurance cover of young people coming into the building industry, he says.
But he believes “common sense will prevail”.
“There’s just no way you can introduce changes that are going to see funds begin to invest in a landscape that sees less opportunity to get higher returns than the index,” Atkin says. “Passive investing does have a role to play, but so does active. So does the illiquidity premium you get from investing in unlisted assets, which has been one of the key ways we have been able to hit above-inflation targets. That’s real money in members’ pockets. I don’t think the government will want to oversee changes where people will get less investment returns for the sake of a heatmap being constructed in a particular way.”
Winning members’ loyalty
With the regulatory spotlight pointed at underperformance and waste, and funds increasingly being forced to win members’ hearts rather than assume their loyalty, Cbus’s industry-leading rate of member satisfaction has always been a point of strength.
Well before his time at Cbus, Atkin recalls working as marketing manager at Superannuation Trust of Australia (which later merged with the Australian Retirement Fund to form Australia’s largest fund, AustralianSuper) on the same floor of Casselden Place in Melbourne, sharing the board room.
“One of my first projects when I came in was to work on the brand of STA,” Atkin says. “I had directors on the board point to Cbus saying ‘Why can’t we have a brand like Cbus.’”
Cbus’s clear focus on the construction and building industries does give it an advantage in spinning a story about investing in real assets like bricks and mortar–exactly what its members do, Atkin admits.
But other funds can learn from the example and look for ways they can play to key thematics of the industries they work with, he says. Cbus has always been clear about what its members want from the fund, and strong on communicating how it is providing that, Atkin says. In a different industry, Media Super’s unique investments in TV and film productions are a good example of funds investing in a way that is highly relevant to members, he says. (Cbus is currently in the process of merging its investment and administration operations with Media Super while maintaining seperate branding).
“The members love the idea they give you their trust that we invest money on their behalf, some of which we invest back into their sector,” Atkin says. “Creating great returns and creating employment is the most powerful way we can communicate what we do as an investor, and having their collective vehicle of benefit to the construction and building industry is really strong.”
His proudest achievement at Cbus is introducing retirement income estimates for members which give a much clearer picture of the actual lifestyle the retiree will enjoy than simple lump sum figures. While it often causes initial shock and disappointment, it is a powerful tool to change member behaviour and get them making responsible decisions to meet their retirement goals, he says.
He hopes it won’t be long before this information is provided in real time rather than in an annualised communication.
“That’s personalised information that talks about savings as retirement income and then gives members action points they can take to improve outcomes. It is the most powerful and relevant way of doing member engagement. But you need the systems, technology and processes to operationalise this productive communication to members.”
Need for policy clarity
But that ball is in new Cbus CEO Justin Arter’s court now and Atkin is focussed on pushing the industry–and the business world more generally–towards greater sustainability.
A growing list of institutional investors have announced net zero targets for their portfolios, leaving the Morrison government an increasingly curious outlier having not committed to net zero emissions by 2050 in its technology investment roadmap.
Atkin pointed to the Investor Group on Climate Change’s annual survey showing the proportion of institutional investors implementing climate-aligned or low carbon strategies had gone from 50 per cent to 90 per cent over the last four years. But the greatest cited barrier to increasing climate aligned investment was policy uncertainty.
“So the technology roadmap, to the extent that it provides an outline of what the government thinks are the technologies that will get us there, is not a bad thing,” Atkin says. “But is it going far enough? The answer is: it’s not. Investors are still seeking more guidance to help them in their decision making, because it’s coming in bits and bobs. Uncertainty is a recipe for people being risk-averse.”
Whatever aspirations funds may have for their members, the community and the business world, funds will need to be big, Atkin says. Even after Cbus’s merger with $6 billion Media Super is completed, taking funds under management past $60 billion, Cbus will need to keep chasing greater scale to remain competitive, he says.
“I think funds that don’t have an aspiration to scale up will be disadvantaging their members,” Atkin says. “Even Cbus at the $60 billion level has got some challenges because you are seeing these mega funds created–Aware, Australian Super, and the merger between Sunsuper and Qsuper–who are all a hundred billion plus. Cbus has always prided itself on being a leader and able to control its destiny, but it will only be able to do that if it continues to be an attractive destination fund for others.”
Aside from sustainability and transparency, Cbus has long taken an interest in mental health and the high suicide rates prevalent in the Australian construction industry. Years of intervention are finally stabilising and even bringing down the rates of suicide in the industry, Atkin says.
But not all funds are involved with Superfriend–which advocates for greater mental health awareness and support in workplaces. A consistent approach across the industry is needed to have a greater impact, he says, particularly with the hardships many are enduring due to Covid-19.
“I genuinely believe the Superfriend initiative’s time is now, given Covid-19,” Atkin says. “There’s no doubt we are going to see the impact of Covid having a demonstrable impact on people’s mental health. It’s really important that preventative programs are put in place, but also programs of support.”