Fund Regulatory Update

YFYS performance tests modified for better member outcomes

The Federal Government is making moves towards strengthening new performance test laws and making sure superannuation funds are not penalised for investments in local infrastructure. After feedback from the industry was overwhelmingly in favour of the changes, the Your Future Your Super performance test is now more member-focused and will include administration fees. Benchmarking on fund performance will be applied to a more appropriate index when counting unlisted assets.

ACSI updates climate change policy

The Australian Council of Superannuation Investors (ACSI) has made changes to its climate change policy, as it looks to improve companies’ approach to climate change. The policy supports the Paris Agreement and for companies to commit to net-zero emissions by 2050. The new policy lays out what ACSI members should expect from companies exposed to climate-related risks, and if a company isn’t performing well, ACSI recommends voting against company directors.

ACSI requirements for companies requires disclosure of the approach to climate-related risk, corporate strategy that aligns with the Paris Agreement, and scenario analysis for stress testing. Short, medium and long-term emissions reductions targets must also be set by companies, with further analysis and management of physical climate change risk. Policy and advocacy with the Paris Agreement are also required while planning for a just and equitable energy transition.

APRA publishes FAQ for the Superannuation Data Transformation Phase 1 reporting standards

The Australian Prudential Regulation Authority (APRA) has published a list of questions and answers for registrable superannuation entity (RSE) licensees regarding the Reporting Standards for Phase 1 of the Superannuation Data Transformation. The FAQ was developed to provide clarity on issues raised by RSE licensees relevant to meeting reporting obligations. More FAQs are in the pipeline as the first submission of data approaches on 30 September 2021. The FAQs are available on the APRA website at Frequently Asked Questions - Superannuation Data Transformation.

APRA releases draft guidelines on how to manage ESG risk

The Australian Prudential Regulation Authority (APRA) has published its consultation draft guidance aimed at banks, insurance companies and superannuation trustees on how to manage the financial risks of climate change.

The Prudential Practice Guide CPG 229 Climate Change Financial Risks is for APRA-regulated organisations to manage climate-related risks and opportunities, and to incorporate those into the existing risk management and governance frameworks.

CPG 229 was developed after industry requests for greater clarity in terms of regulatory expectations and examples of better industry practice. The document reviews APRA’s ideals of sound practice when it comes to governance, risk management, scenario analysis and disclosure.

There are no new requirements or obligations and is clear that the guidance is flexible so each institution can work with an approach appropriate for its size, customer base and business strategy.

Stakeholder feedback is being sought on the draft by 31 July 2021, with the final document to be ready before the end of 2021. Draft CPG 229 and supporting resources at: Consultation on draft Prudential Practice Guide on Climate Change Financial Risks