ASFI is pleased to have supported research led by the Conexus Institute together with FTSE Russell and the Responsible Investment Association of Australasia into the impact of the Your Future Your Super (YFYS) performance test. The results demonstrate that YFYS is currently constraining the ability of superannuation funds’ to implement strategies consistent with ESG, sustainability and carbon transition activities. Trustees are faced with a difficult decision between living with a heightened likelihood of failing the YFYS performance test at some point or having to pare back the degree to which they engage in activities related to sustainability, ESG and carbon transition.

The paper underscores the need to ensure that financial policy and regulation in Australia does not inadvertently hinder the pursuit of broader goals. This includes the development of a financial system that appropriately addresses and accounts for long term risks and opportunities related to climate change and sustainability. The paper strengthens the argument for the YFYS Review to address this issue so as to avoid negative impacts on the retirement outcomes of Australians.