Strengthening Investment Governance: The Impact of SPS 530 on Australian Superannuation Funds

The Australian Prudential Regulation Authority (APRA) has introduced updates to Prudential Standard SPS 530, with the revised standard taking effect from January 1, 2023. These changes are a critical step towards enhancing investment governance within superannuation funds, aiming to increase transparency and efficiency across the sector.S

PS 530 applies to all registrable superannuation entity (RSE) licensees, setting clear expectations for investment governance. The standard requires licensees to establish measurable investment objectives, conduct thorough due diligence, regularly assess investment performance, and implement annual stress testing. Additionally, licensees must create liquidity management plans and establish a valuation governance framework to ensure consistency and accuracy in asset valuations.

While SPS 530 focuses on improving governance, the accompanying SPG 530 guidance emphasizes the growing importance of Environmental, Social, and Governance (ESG) considerations. Although integrating ESG factors is not a formal requirement under SPS 530, APRA encourages RSE licensees to incorporate these factors into their investment decision-making, aligning with global trends in responsible investing.

Key Requirements of SPS 530

SPS 530 outlines several measures that RSE licensees must adopt to ensure robust investment governance:

1. Investment Objectives: Licensees must set clear, measurable investment objectives for each investment option offered to members.
2. Due Diligence: A comprehensive due diligence process is essential to ensure proper investment selection and ongoing monitoring.
3. Performance Monitoring: Licensees are required to assess and report on investment performance regularly, ensuring alignment with objectives.
4. Annual Stress Testing: Stress testing programs must be conducted annually to evaluate potential risks under different market conditions.
5. Liquidity Management: Effective liquidity management plans, including clear metrics for reporting and oversight, are mandatory.
6. Valuation Governance: A valuation governance framework must be implemented to ensure accuracy and consistency in valuing assets.

How Dasseti Can Help RSE Licensees Comply with SPS 530

Meeting the strict requirements of SPS 530 may seem daunting, but Dasseti’s platform offers a range of solutions to simplify compliance and enhance investment governance for RSE licensees. Our platform delivers the following key benefits:

• Automated Data Collection: Dasseti automates the collection and organization of critical investment data, supporting due diligence and ongoing reviews.
• ESG Data Management: Our platform includes specialized tools for collecting and analyzing ESG data, aligning with the ESG guidance in SPG 530.
• Customizable Reporting & Analytics: Licensees can generate detailed performance reports and analytics to ensure accurate reporting to senior management and the board. This includes comparison reports from previous periods, allowing users to track changes over time effectively.
• Alert Reporting on Changes: Dasseti’s system provides alert reports that highlight significant changes in data from previous periods. This feature is particularly useful for stress testing and liquidity assessments, enabling RSE licensees to respond promptly to any material shifts in their portfolios.
• Stress Testing Support: Dasseti’s advanced analytics help licensees develop robust stress testing programs that meet annual requirements efficiently while also allowing for a detailed analysis of potential impacts based on historical data comparisons.
• Compliance Monitoring: Dasseti’s built-in compliance checks and alerts keep RSE licensees up to date with their regulatory obligations, simplifying ongoing governance.

Conclusion

SPS 530 marks a significant development in how superannuation funds in Australia manage and govern their investments. By strengthening governance frameworks and encouraging the integration of ESG considerations, the standard paves the way for more resilient superannuation funds. As RSE licensees work to meet these new regulatory requirements, leveraging technology platforms like Dasseti is essential for streamlining compliance and enhancing overall investment governance.