Net-zero rules are increasingly shaping where Australian money is directed, even as the climate impact of those settings remains contested and the financial incentives are concrete. Super funds, treasuries and regulators now treat “climate alignment” as a core requirement, and that framing influences how member savings are allocated.
Over the past two years, the federal government has expanded a sovereign green bond program, with the Australian Office of Financial Management issuing an inaugural $7 billion Green Treasury Bond in mid-2024 and signalling further issuance. Official material presents the program as a way to mobilise climate-aligned capital and signal policy commitment. In practice, it also creates a labelled class of government debt that many institutions feel compelled to hold for regulatory, reputational or disclosure reasons. As the sustainable finance framework develops, tax incentives and reporting rules increasingly sit around these instruments, nudging capital toward projects that meet government-defined criteria, regardless of whether their real-world emissions impact is easily measured.
Superannuation funds are moving along a similar track. Large funds, including AustralianSuper, have adopted portfolio-wide net-zero targets and expect investee companies to demonstrate transition planning. Regulators such as APRA and ASIC now require trustees to integrate climate and broader ESG considerations into investment governance, supported by common metrics and disclosure templates. The cumulative effect is that boards must increasingly justify exposure to carbon-intensive assets, while holdings that sit comfortably within net-zero narratives face fewer questions.
The policy framing is typically described as risk management: if the global economy decarbonises, assets that fail to adapt may lose value, and trustees have a duty to anticipate that risk. The difficulty is that the pace, direction and unevenness of any transition remain uncertain. In practice, allocating capital to “climate-aligned” assets often concentrates investment in a relatively narrow set of renewable, infrastructure and green-technology exposures that score well in ESG frameworks, even when the link to verifiable emissions reductions is indirect.
For members, the practical result is that large volumes of superannuation savings are being steered into strategies labelled “sustainable” or “climate-aware”. Whether those allocations deliver superior risk-adjusted returns will depend less on labels than on how energy markets, technology and policy evolve over time. Funds are effectively betting that long-term policy support and regulatory alignment will validate those positions. If assumptions change, a significant share of capital may end up allocated more by disclosure logic than by performance.
The views expressed in this article are the author’s own and do not necessarily reflect those of this publication.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.