Think your super fund is investing ethically? It pays to double-check

Workers who want their super to be invested ethically should be wary of the claims made by their fund after the corporate regulator found some funds were engaging in “greenwashing” over false statements that they exclude some types of investments.

The $4 trillion in Australian superannuation savings – one of the largest pots of retirement savings in the world – gives super funds and their members enormous clout in influencing the behaviour of Australian-listed companies in which super funds invest.

Estelle Parker from the Responsible Investment Association Australasia says more people are wary of greenwashing claims.

As substantial shareholders, super funds can exert influence on the corporate boards of the companies or shun sectors deemed harmful, such as fossil fuels in favour of renewable energy, for example.

The Australian Securities and Investments Commission’s actions against super funds for overstating their green credentials in advertising material has increased awareness of greenwashing among super fund members.

Estelle Parker, co-chief executive of Responsible Investment Association Australasia (RIAA), which promotes ethical investing, says Australians are more wary of greenwashing and their trust in some claims made has decreased.

A survey conducted by RIAA this year found 78 per cent of respondents had concerns with greenwashing with investments, not just super funds. That figure was up from 72 per cent in 2022.

Almost 80 per cent of the 2000 adults surveyed said they would be more inclined to invest in products labelled as responsible or ethical by an independent source.

“Transparency is key. Everybody’s ethics and values are different: to some people, it is investing in renewable energy, while for others it is avoiding human rights abuses. What’s important is information so they can make decisions based on their values,” Parker says.

Those who want their retirement invested in a way that aligns with their values have to do their homework on how super funds invest, which is no easy matter.

Karen McLeod, a financial planner with Ethical Investment Advisers, says it is difficult to determine those that are avoiding harm from those seeking positive solutions for the planet and society.

She says there are whole areas, such as animal cruelty and human rights abuse, that are usually not included in the screening processes of super funds.

The RIAA survey found that despite animal cruelty being the top issue for consumers, only 11 per cent of Australia’s superannuation and investment sector is invested in funds that screen investments in companies that conduct animal testing.

The association has a selection tool where users nominate what is important to them in a super fund, such as “renewable energy and energy efficiency” or issues to be avoided, such as “animal cruelty”. The selection does not consider the performance of funds or their fees.

The selection is only from those super funds the association has certified. Those that invest the way they say they are, disclose all of their holdings, as well as how they have voted the shares they hold at company meetings.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that considers their personal circumstances before making any financial decisions.

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