Australia’s superannuation industry faces mounting financial risks as political hesitation over climate policy threatens to derail the country’s transition to a low-carbon economy. According to new analysis by Ortec Finance, the lack of decisive government direction could lead to major long-term losses in superannuation fund performance if the shift to net zero continues to stall.
The firm’s report applies its proprietary 2025 climate scenarios to the investment portfolios of Australia’s 30 largest superannuation funds. Under a high-warming trajectory, where global temperatures surpass 3°C by 2100, returns could decline by as much as 38% by 2050.
Ortec Finance climate risk specialist Doruk Onal said, “Climate change is intrinsically linked to economic fundamentals and is disrupting the vital pillars of economic stability. The effects on GDP growth and inflation are structural, persistent and increasingly visible in economic forecasts.”
Political indecision, particularly in the run-up to the 2028 federal election, could further slow Australia’s progress toward decarbonisation. Even a five-year delay in policy implementation could have lasting consequences, with average superannuation fund returns falling by around 9% by mid-century under a delayed transition scenario, it said.
The report warns that failing to pursue a low-carbon transition will impose severe long-term costs on Australia’s economy. Without new climate policies, GDP could fall 9% below current projections by 2050 as rising temperatures, heat stress and extreme weather undermine productivity and fuel inflation. Conversely, a smooth transition supported by measures such as carbon tax revenue recycling would help sustain growth, investment and household consumption.
Ortec Finance’s findings also point to an emerging inflation threat tied to worsening physical climate risks. Under a high-warming scenario, climate-induced pressures could add 0.7% to annual inflation by 2050, pushing it above the Reserve Bank of Australia’s target range. With inflation currently at 2.1%, this would further erode purchasing power—particularly affecting retirees whose investment returns are simultaneously under pressure.
Superannuation portfolios are expected to experience a dual hit from falling nominal returns and rising living costs. By 2028, funds could see a 2% decline in portfolio value under a high-warming path, deepening to 6% by 2035 and up to 38% by 2050.
Ortec Finance managing director of climate scenarios and sustainability, Maurits van Joolingen, said, “Climate change is systemic, but it does not impact all geographies equally. If superannuation funds are to mitigate climate risk, they must rethink strategic asset allocation to incorporate geographic variation.”
Van Joolingen added, “This report clearly shows that the immediate costs of transitioning to a low-carbon economy are significantly outweighed by the long-term physical impacts and escalating costs of continued climate inaction. The future performance of Australian superannuation funds will depend on how decisively the world reduces carbon emissions: an early transition offers steadier growth and inflation, while a high warming future risks severe and lasting economic damage. The industry must plan for both possibilities.”
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