Responsible super funds come out on top

Super funds that invest responsibly perform better than those that don’t, new research reveals 

Australian super funds are ramping up their responsible investments in a bid to perform better financially and make their members happy, new research finds.  

Responsible Investment Association Australasia’s (RIAA) latest report found 13 funds, considered leaders in the responsible investing space, outperformed 41 other funds over one, three and five-year time frames. 

A responsible approach to investing is defined by RIAA as one that systematically considers environmental, social and corporate governance (ESG) and/or ethical factors across the entire portfolio. 

Launched on Friday, the annual Investment Super Study named Australian Ethical, AustralianSuper, CareSuper, Cbus, Christian Super, First State Super, Future Fund, Future Super, HESTA, Local Government Super, Unisuper, VicSuper and Vision Super – along with NZ Super Fund – as leaders in the space. 

After one year, super fund leaders that screened for environmental, social and governance factors had a return of 8.11 per cent, compared to 7.33 per cent for the other superfunds. 

Returns increased to 9.81 per cent after three years for funds that invested responsibly, compared to 9.06 per cent for funds that did not. 

Simon O’Connor, RIAA CEO, said the outperformance of responsible investment superfunds across the one, three and five year measurements was “stark”.  

“This reinforces how important the consideration of ESG factors is to deliver the best possible outcomes for super fund members,” O’Connor said.

The report found that 61 per cent of super funds had at least one negative screen across the whole fund, up from 34 per cent in 2016. 

The most popular fund-wide exclusions were found to be tobacco and armaments, followed by fossil fuels. 

The report also noted that as public concern continued to grow around the risk of climate change, funds were taking it on at a board or committee level. 

“The number of funds systematically considering climate change at board meetings has almost doubled since 2018 to 10, representing 18 per cent of the research universe,” the report said. 

The rise in consumer expectations for responsible investment choices has also meant more super funds are reporting on their investment activities. 

The report said however that full disclosure rates remain low, with just 12 per cent of super funds publishing their holdings.    

The 57 superfunds surveyed account for $1.75 trillion in assets under management. 

It was revealed earlier in the year that responsible assets now represent 44 per cent of Australia’s total $2.25 trillion in professionally managed assets, up from just 13 per cent in 2013 when responsible investments accounted for $178 billion. 

A full copy of the report can be found here.