INVESTING

The 14 greenest and cleanest superannuation funds

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If you want your superannuation to perform well and help the planet, the good news is you can.

New research validates that superannuation funds using responsible investing with environmental, social, governance and ethical factors outperform other superannuation funds that don't.

At a time of rising concern about climate change and the financial implications, the Responsible Investment Association of Australasia (RIAA), shows that Australian super funds comprehensively engaging in responsible investment are outperforming their peers over one, three and five-year time frames.

14 greenest super funds

This is what the RIAA found.

Of the 57 MySuper funds surveyed (with assets of $1.75 trillion), the average return over five years to June this year was 7.98% each year. Of these, 34 MySuper funds using responsible investment strategies produced an average return of 8.14% pa over five years. The 14 super funds with the best responsible investing considerations did even better with an average return of 8.71% pa over the five years.

The top 14 funds that made the RIAA leader board include Australian Ethical, AustralianSuper, CareSuper, Cbus, Christian Super, First State Super, Future Fund, Future Super, HESTA, Local Government Super, NZ Super Fund, Unisuper, VicSuper and Vision Super.

RIAA chief executive Simon O'Connor says: "We are witnessing a strong uptake of responsible approaches to managing retirement savings by super funds and other large asset owners. "

At the same time more than 92% of Australians expect their super or other investments to be invested responsibly and ethically with 78% of Australians saying they would consider moving super or other investments to another provider if their current fund engaged in activities not consistent with their values, according to the RIAA.

In face of rising public concern and increasing financial consequences of climate change, O'Connor says the consideration of climate risk by super fund boards continues to grow. It found 81% of Australia's largest super funds are committed to responsible investment (up from 70% in 2016), and 72% report annually on responsible investment activity (compared to 44% in 2016).

Also 61% of super funds have a least one negative screen across the whole fund, up from 34% in 2016. The most popular fund-wide exclusions are tobacco and armaments, followed by fossil fuels.

More than half of super funds offer a total of 88 responsible investment options (compared to 24 funds offering 54 options in 2016). The RIAA found that retail funds offer the largest variety of RI options per fund.

Super funds are employing more responsible investment employees, doubling since 2018 and quadrupled since 2016.

RIAA found that the number of funds systematically considering climate change at board meetings has nearly doubled from 2018 to 10, representing 18% of the research universe. - Boards are starting to adopt the Task Force on Climate-related Financial Disclosures (TCFD) in their reporting Eight funds referenced TCFD in their current or upcoming reporting and/ or assessment processes, but only two had reported against TCFD at November 2019.

But, O'Connor says there is room for improvement. RIAA found that half of the funds surveyed do not disclose engagement activity or outcomes. In fact, O'Connor says many of Australia's largest super funds are still not showing clients how their money is being invested on their behalf.  He says just 12% of super funds publish their full equities holdings.

Fewer than 20% of funds provide an online tool for members to compare features and returns of RI options.

It also found there was a disconnect between investment principles and voting policies, with few fund managers imposing voting policies in line with super funds' policies.

The funds were assessed on five criteria:

  • Accountability and governance. 
  • Responsible investment commitment.
  • Responsible investment implementation.
  • Measurement and outcomes.
  • Transparency and responsiveness.

Top 14 funds

Responsible Investment Super Study leaderboard

  1. Australian Ethical
  2. AustralianSuper
  3. CareSuper
  4. Cbus
  5. Christian Super
  6. First State Super
  7. Future Fund
  8. Future Super
  9. HESTA
  10. Local Government Super
  11. NZ Super Fund
  12. Unisuper
  13. VicSuper
  14. Vision Super

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
Comments
Andrew Trevorrow
February 14, 2020 12.07pm

How can AustralianSuper be #2 on the list when it's a big supporter of the fossil fuel industry?

https://www.theage.com.au/busi...

Nathalie Verellen
February 18, 2020 11.29pm

THEY HAVE A SOCIALLY AWARE FUND, WHICH DOES NOT DIRECTLY INVEST IN FOSSIL FUELS, BUT DO NOT EXCLUDE COMPANIES THAT WORK WITH OTHER COMPANIES THAT SUPPORT FOSSIL FUELS. NOT SURE IF THEY DESERVE #2

ashley felderhof
May 18, 2020 2.31pm

interesting that no-one's bothered to reply to your question on this Andrew...

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