Australian super funds’ collaboration with their British counterparts to change UK policy settings is an engagement effort the first of its kind. However, as the global pension industry and financial markets become increasingly entwined, it certainly won’t be the last.
Last Wednesday, IFM Investors led a consortium of pension funds in pressuring the UK government to take policy action to unclog its stagnant pipeline of infrastructure deals, especially around energy transition.
The profit-to-member-funds-owned asset manager published a clean energy blueprint with a list of 20 recommendations for the UK Treasury, which it said will help “create a supply of new investable projects”.
Local signatories are Aware Super, CareSuper, Cbus, HESTA, Hostplus and REST, and UK signatories include the defined benefit Border to Coast Pensions Partnership and the nation’s largest defined contribution scheme NEST. Collectively, the funds manage £1.7 trillion. The UK pensions trade association, Pensions and Lifetime Savings Association, is also in the mix.
For the rest of last week, IFM Investors global head of external engagement David Whiteley says the manager, alongside chief investment officers of UK pensions and executives from super funds, had a series of initial briefing with UK think tanks and policy makers.
Whiteley, who is in the UK, is speaking to Investment Magazine on the day of the Starmer government’s International Investment Summit, where serious policy measures to woo foreign capital in AI, life sciences and infrastructure are expected.
Previously the chief executive of Industry Super Australia, Whiteley says everyone has approached the blueprint with a “practical” perspective.
“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 says.
“All of those discussions are with a fairly broad group – what we will be doing in the future, of course, is engaging directly with the government here over the next few years.”
A central piece of the blueprint’s recommendation is a call to reform the UK’s public sector net debt structure. It currently does not account for the value of illiquid financial assets the government invests in.
“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 IFM Investors executive director Gregg McClymont in a media release.
There has been an ongoing debate in the UK about the role of fiscal rules in supporting capital investment, and Whiteley says that by engaging as a collective, pension funds will have an even more powerful voice.
“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 and advocacy strategy than everyone having their own views,” Whiteley says.
Whiteley says the UK had been “an obvious place to start” with this pioneering engagement effort because firstly, the government has an ambitious goal for financing the energy transition; and secondly, funds and IFM Investors itself are establishing a bigger presence.
Aware Super last year opened a new London office, which originated and completed its first infrastructure deal last month. IFM Investors itself has a large client base and around 60 investment professionals working out of Europe.
It came after IFM Investors published a similar energy transition blueprint to engage with the Australian government in late 2023. When asked if there are plans to expand the blueprint further into other global markets, Whiteley says he “wouldn’t rule it out”, but not without understanding the market and regulatory nuances a bit more first.
Meanwhile, another issue high on the engagement agenda alongside energy transition is social and affordable housing.
“There’s seemingly housing shortage in very many countries, so it’s an issue that is relevant to other jurisdictions,” Whiteley says.
“We see opportunities to invest in the energy transition, or opportunities to invest in social and affordable housing, which will deliver the returns back to members, and also recognising that disorderly transition can have significant impact on returns in the long term.
“This collaborative piece we’ve done here, the purpose is to generate investment opportunities ultimately, for our owners, our clients and their members.”
