Can your super be good for you and the planet?
Australian superannuation funds invest trillions of dollars held in 22.2m member accounts. Our money makes things happen. It's invested in everything from infrastructure, equities, property, retail and banks to gambling, tobacco and fossil fuels.
Anyone concerned about social harm, human rights, environmental degradation or climate change might want to look closely at how and where their money is invested. If you're making choices in your everyday life to do better, such as by choosing certain brands, recycling or using renewable energy, consider how this could be amplified by directing your retirement savings into projects and businesses that do good on a bigger scale.
Funds differ in their approaches to ethical investment. One fund, or investment option, might only screen out certain sectors, while another might also look for companies and projects that do good, and allocate capital towards them.
Lots of different labels are used to describe investment approaches, which can make it difficult to assess at a glance how ethical a fund is. The lines are blurred between the terms ethical, sustainable and responsible.
Some approaches sound good but may not be what you are looking for. Applying an ESG (environmental, social and governance) filter, for example, is about assessing financial risk rather than making judgments based on ethics, and could lead to portfolios containing companies you don't approve of.
It's also worth noting that ethics vary from one individual to the next. What you consider ethical and what a fund considers ethical may not be the same thing.
Look at the investment options in most super funds and you'll find a range of categories to choose from. These categories are often focused on your stage of investing and appetite for risk, rather than the ethical nature of the investments.
Even when super funds offer choices, most are primarily focused on returns. You'll find high-growth (and high-risk) investment options, or more conservative options with lower risk, often favoured by people close to retirement.
Some funds also offer ethical investment options. Australian Ethical specialises in them; investments in sectors such as fossil fuels, nuclear energy and tobacco are restricted, while investments in sectors such as renewables, healthcare and IT are supported.
How ethical investments are chosen varies between funds, and between investment options within funds, but the goal is always to get good returns as well as invest ethically.
Since March 2022, super funds have been obliged to provide publicly accessible twice-yearly portfolio holdings disclosure statements, which outline the composition of the investment options they offer. However, if you're not a finance nerd, these statements can be overwhelming. Luckily, they are not the only tools at your disposal.
You may find reports on ethical funds in the media. The funds themselves can also be a source of information; many are keen to explain their different approaches to investing, and offer detailed information about their ethos and investment choices.
The Responsible Investment Association Australasia (RIAA) ranks ethical super funds on an investment scorecard in its annual responsible leaders report. Organisations such as Market Forces, which exposes institutions financing environmentally destructive projects, or Choice, can also help you determine if your super fund or investment option is the right one for you.
Research has found that many ethical funds or investment options perform just as well as, if not better than, standard superannuation offerings. The fund researcher SuperRatings benchmarks the performance of super funds with ethical options, and in 2024 ranked Australian Ethical's Australian shares option number one for returns over 10 years out of 39 funds.
The ATO, Canstar and Finder all offer comparison tools through which you can see how your fund is performing. If you're unhappy with the ethics of your fund's investments, the Responsible Returns comparison website can help you find an ethical super fund that meets your criteria.
Learn more about how Australian Ethical can invest your money to help build the future you want for yourself, your family and the world.
This information is general in nature and is not intended to provide you with financial advice or take into account your personal objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances and read the PDS and TMD at australianethical.com.au. Issued by Australian Ethical Superannuation Pty Ltd (ABN 43 079 259 733, RSE L0001441, ASFL 526 055).
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