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TelstraSuper expands ‘nimble and innovative’ climate investments
TelstraSuper has invested in Quinbrook’s Net Zero Power Fund as it hunts more opportunities for its members to benefit from the transition to a lower carbon economy, with a target of one per cent of its portfolio invested in climate-changed focussed investments by 2025.
The Net Zero Power Fund’s portfolio includes utility-scale solar farms and battery projects, sustainable data centres and the Supernode battery project and sustainable data centre campus, located north of Brisbane. For TelstraSuper CIO Graeme Miller, the investment “sits at the intersection of a number of key thematics”.
“On the one hand we’ve got artificial intelligence, which is very processor hungry and requires very large data centres to operate,” Miller tells ISN. “There’s been an absolute explosion of data centres and data processing, and we want our members to be exposed to the great potential that offers. The other themes are decarbonisation, and of reliable renewable energy. And then there’s battery storage. In the Quinbrook fund, we found something that pulls together all of those powerful themes.”
The fund is running ahead of schedule on its 2025 commitment, with investments now including the Quinbrook fund, green hydrogen startup Hysata, a global carbon credits fund from Apostle and a California carbon credits fund from PIMCO, and a climate-oriented long/short strategy from US-based macro hedge fund Caxton Associates.
“We’ve always sought to be nimble and innovative, and we’ve always been very thoughtful about where we are likely to have a competitive advantage in a highly competitive superannuation landscape,” Miller says. “We’re focussed on investing in opportunities where they present themselves, and being prepared to do so ahead of the market in general.”
TelstraSuper’s circa $27 billion of funds under management means its closer to the ‘small’ end of the scale, which Miller believes works in its favour when it comes to seizing more unique innovative investment opportunities. Markets are highly dynamic, Miller says; opportunities can be fleeting, and there’s a strong first mover advantage.
“Because we’re a relatively small fund and have a relatively small team we’ve been very focussed on being nimble and being decisive and having very efficient governance processes that allow us to move through from conception to research to deeper due diligence in what we like to think is a much shorter timeframe than many of our much larger competitors that potentially get bogged down in more complex implementation, review and research requirements.”
“(TelstraSuper’s size) allows us to make relatively small investments that are nonetheless meaningful in the context of our portfolio and can actually move the needle when they’re successful. The size of the investments and the size of the opportunities presented to us are such that much larger competitors would find it difficult to access them at scale and probably, in some cases, wouldn’t go through the time and expense associated with due diligence because they just couldn’t get enough exposure for it to be meaningful.”
TelstraSuper returned 9.6 per cent in its growth MySuper option, and Miller believes the movement of inflation and interest rates will now be the ultimate determinant of the path of markets. Geopolitics is a consideration too, even though recent events have shown that it’s “impossible to make accurate predictions about how geopolitical events will unfold”.
“Like many funds, we started the 2023-24 financial years positioned quite conservatively, and with the benefit of hindsight probably more conservatively than we should have been,” Miller says. “But we have been progressively reducing that level of caution over the year and as we go into 2024-25 I’d characterise our position as pretty neutral, and if anything there’s a moderate bias to a bit more risk, and that’s off the back that believing the surprising resilience we’ve seen in economies and employment means we may well avoid the recession we thought we were going to have… We’ve been adding risk to the portfolio in recent months.”
