Ethical super: doing good and performing better than ‘standard’ funds

Ethical superannuation investment options perform just as well if not better than mainstream options over the long term, research has shown.

Data from superannuation research house SuperRatings identified almost no difference in the typical returns of ethical options and balanced options, where most people, still working, have their money.

Long-term performance figures show ethical superannuation options hold their own against mainstream options.Credit: Synergy

Industry super fund HESTA’s Sustainable Growth investment option was the standout performer, not only among ethical options but among super funds’ mainstream offerings too.

The investment option’s average annual compound return of 9.5 per cent over the 10 years to March 31, 2023 put it well ahead of the second-placed VicSuper FutureSaver Balanced Socially Conscious investment option, which produced a return of 8.4 per cent over the period.

CareSuper’s Sustainable Balanced option completed the top three spots in SuperRatings’ Balanced Sustainable category, with a return of 8.2 per cent.

Superannuation is the longest and, along with the family home, most significant investment most people will make. Returns over the long term are what count, not returns over short time periods.

More people want their retirement savings to be doing good as well as producing strong investment returns. But a good performance record, even a good long-term record, is no guarantee that such returns will continue.

More funds are incorporating environmental, social and governance investment principles into their mainstream offerings.

Over the 10-year period, Hostplus’ Balanced option, where most fund members have their money, produced an average annual return of 9 per cent – the best performer among balanced options.

AustralianSuper Balanced came second with 8.7 per cent and Australian Retirement Trust Super Savings Balanced was third with 8.5 per cent.

HESTA’s Balanced Growth option, where most HESTA members have their money, returned 8 per cent, the eighth-best performer in SuperRatings’ balanced category.

Joshua Lowen, insights manager at SuperRatings, said that over the past 10 years, top-performing sustainable options had provided similar, or in some cases better, returns as mainstream options, mainly due to their higher exposure to technology equities, which performed well in the mid to late 2010s.

Most of the top 10 positions in the performance tables for ethical options are taken by not-for-profit super funds, which Lowen attributes to their propensity to invest in unlisted assets and fees that have been historically lower than many of their retail fund competitors.

Over the seven years to March 31, 2023, HESTA’s Sustainable Growth option was the best-performing ethical option too, with an average annualised compound return of 8.7 per cent.

VicSuper’s FutureSaver Balanced Socially Conscious option held second spot with a return of 8.2 per cent, followed by CareSuper Sustainable Balanced on 7.9 per cent.

VicSuper merged with First State Super and WA Super in 2020 to form Aware Super. VicSuper’s FutureSaver Balanced Socially Conscious option will be renamed this month to the Aware Super Balanced Socially Conscious option.

Debby Blakey, chief executive at HESTA, said the results showed it was possible to achieve strong long-term investment returns and contribute to a healthier planet and society.

She attributed HESTA’s strong performance to the investment expertise of its team and the quality of the external investment managers the fund employs, particularly those it employs for international shares.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. Readers should always seek their own professional advice, which takes account of their own personal circumstances, before making any financial decisions.