The conscientious investor's power is proven and an evolution of our super industry is taking place. Until now, the missing link has been enough independent information available for people wanting to invest responsibly.
By Simon O'Connor, CEO, Responsible Investment Association Australasia
This is an article from our member-only magazine, habitat. To receive habitat and enjoy more stories like this, become an ACF member today.
When was the last time that you thought about the origins of your coffee beans or whether the eggs you’re about to buy have been laid by happy, free-roaming chickens?
Chances are it’s more recently than you’ve thought about your superannuation.
Yet for most Australians, our super is the second biggest investment we will ever make. Whether we like it or not, nearly 10 percent of our wages are invested into superannuation every pay cheque, with only those of us fortunate enough to purchase a home ever making a larger investment.
This is a problem lined with a huge opportunity. The $2 trillion+ sitting in Australian superannuation funds is shaping the social and environmental outlook of our country. We can choose to put this money towards smart, innovative, clean businesses of the future, or we can continue to prop up industries that pollute and damage our living world.
In reality, most of us who are concerned about protecting our planet will find ourselves scratching our heads in the supermarket aisle working out which brand of chocolate won’t destroy the rainforests and will protect the livelihoods of cocoa farmers in developing countries. Yet meanwhile, our quarterly statement from our super fund collects dust on the mounting pile of unopened mail.
The $2 trillion+ sitting in Australian superannuation funds is shaping the social and environmental outlook of our country.
Thankfully we are starting to change. Finance — investments, super and banking — is never going to look the same again. More and more people are awaking to the fact they can align their money with their morals not just in a philanthropic manner, but also to achieve great returns.
Campaigning organisations such as ACF have played a role in this awakening. Today, numerous civil society groups are encouraging their networks to target the business and finance industry, with divestment from fossil fuels alone playing a catalytic role in connecting citizens with their savings.
The Responsible Investment Association Australasia (RIAA) has been mapping the size and growth of ethical and responsible investors for the past 16 years. Over this time, demand for ethical investments (that is, investment in industries that contribute positively to society and the environment) had remained stubbornly low. The $2 trillion+ in Aussie superannuation funds slushing around the economy is shaping the social and environmental outlook of our country.
But change is happening. Funds flowing into ethical investments have doubled in the past two years, from $32 billion in 2015 to $65 billion in 2017. This is a jump of 2.5 per cent of the market to 4.5 per cent. And there are no signs of slowing down.
The trends are mirrored internationally. Responsible investing is now a major force across global financial markets. Around the world, people are choosing to use funds that invest in industries like clean energy, education, healthcare, innovative technology and medical solutions.
Around the world, people are choosing to use funds that invest in industries like clean energy, education, healthcare, innovative technology and medical solutions.
As this shift in capital towards ethical and responsible funds takes place, many super funds are taking note.
In the past, super funds would rarely hear from their members. But funds are now receiving calls and emails from members wanting to know if their super is invested in tobacco or fossil fuels, offshore detention centres or coal seam gas and even how the fund is voting in relation to climate change resolutions at the AGMs of some of the world’s largest companies.
Investors are responding to these concerns.
More and more, investment companies are realising that good investment relies on understanding more than just what is found in the financial statements.
Today in Australia, one in every two dollars is invested by people who are committed to considering environmental, social and corporate governance issues and opportunities in their daily investment decision making.
In the last three years, more than 35 Australian super funds have divested from tobacco, moving more than $1.5 billion out of this industry. Beyond divestments, we are also seeing a sizeable shift towards socially and environmentally beneficial industries.
Our recent reports have showed a significant step up in ‘sustainability themed’ investments across green property funds and clean energy funds, sustainable agriculture and a growth in impact investments, indicating billions are flowing into responsible investments.
Funds are now receiving calls and emails from members wanting to know if their super is invested in tobacco or fossil fuels, offshore detention centres or coal seam gas.
Super funds are realising they can have a positive impact whilst delivering strong returns in line with member expectations. This has now reached a scale where this isn’t just a passing trend, but an evolution of the entire sector that is being driven strongly by consumer engagement.
Research commissioned by RIAA shows most Australians would rather invest in a fund that puts people (and the planet) before profit. However, a lack of independent information was found to be a major obstacle to people switching to investing responsibly.
Last year RIAA decided to do something about this, launching the Responsible Returns web tool. It fills the gap for Australians seeking information about ethical investment to products that match their interests and concerns. For example, this could mean investing in sustainable transport and education or avoiding investing in fossil fuels or companies with a murky record on human rights.
Australians are more willing than ever to move their investments to create strong social and environmental impact, to ensure their second biggest investment is aligning their money with their morals. This shift has only just begun, but is sure to continue to shape the investment industry for years to come.
If you’re yet to think about the impact your superannuation is having, perhaps it’s time to open that letter from your super fund. Inside lies one of your biggest opportunities to shape this world.
If you’re yet to think about the impact your superannuation is having, perhaps it’s time to open that letter from your super fund.
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