Some of Australia’s largest superannuation funds are taking a cautious approach to investments in U.S. energy assets due to policy uncertainty for renewable and fossil fuel projects.
Cbus Super, Melbourne, with A$100 billion ($63 billion) in assets, said some large investors will hesitate to deploy capital into energy projects until after the U.S. midterm elections in 2026. Rival fund Aware Super, Sydney, with over A$170 billion in assets, said it would be “thoughtful” about which energy transition assets to invest in.
Both funds participated in an investment summit in the U.S. last month which promoted Australia’s A$4.2 trillion pensions industry. The event highlighted the world’s fastest-growing retirement system where firms are looking to invest offshore as they outgrow local markets and have a large appetite for infrastructure projects, including renewables.
When it comes to backing fossil fuels or green energy, both political parties in the U.S. “appear to be so far apart”, according to Jordan Kraitan, the head of infrastructure and investments at Cbus, which invests in solar farms in California and Arizona.
“It will most likely give us, and I’m sure other investors, a bit more pause for thought about the very, very specific risks,” Kraitan said, adding investors may also be wary of investing heavily in fossil fuels because their outlook was also uncertain.
Still, not all investors are waiting for uncertainty to pass, according to Rich Nuzum from pension, asset manager and consultant Mercer. He said many funds “feel their job is to outperform their peers” or the market.
“And to do that, they need to take risk and they need to be early and be right,” he said in an interview.
Deanne Stewart, chief executive officer of A$190 billion pension Aware Super, said her fund was looking at “mega trends” in the U.S. economy, and that digital assets continued to appeal because of backing from both Democrats and Republicans. The fund would be more discerning toward energy transition assets in the U.S., she said.
“At the moment, we would be making sure that they would have longevity regardless of what’s occurring,” Stewart said.
Australia’s pension system is forecast to surpass Canada and the UK to become the world’s second-largest retirement system by 2031, behind the U.S.
