Members turn up ESG heat at super fund annual meetings

Superannuation funds are being put under increasing pressure by members on how they are addressing environmental, social and governance issues in everyday operations and financial decisions.

Wider-ranging disclosure regulations that have recently come into effect have the potential to make funds even more uncomfortable when the next round of annual meetings kicks off in October.

Members are putting the squeeze on their super funds about how their retirement savings are managed.Credit:

ESG accountability, fund performance and fees are high on agendas of members who attend annual fund meetings, according to financial regulator the Australian Securities and Investments Commission (ASIC).

Super funds are mandated to host the meetings, aimed at increasing the accountability of directors and executives for managing members’ retirement savings.

Funds are required to provide a reasonable opportunity for members to ask questions. They must also publish minutes of the meetings, including answers to members’ questions, on their websites.

Due to the COVID-19 pandemic, all of these meetings have been held online, opening up an opportunity for many more members to become more engaged with their super fund.

ASIC says the first round of annual meetings – held between October, 2020 to March, 2021 – went smoothly but have, nonetheless, raised some issues.

The regulator says some funds could communicate better with their members and there is room for improvement in the way they provide opportunities for members to ask questions at meetings.

“Under the law, trustees are required to give members reasonable opportunities to ask questions,” ASIC says. “Providing information about the process involved, including through meeting materials and on the fund’s website, will help give members the confidence to ask questions,” it says.

Tighter disclosure regulations will give super funds even more reason for discomfort over member questions into their operations and performance.

Additional declarations will be required to be made by funds, including the listing of donations and payments to political parties, lobby groups, unions and industry associations.

Senator Andrew Bragg has been leading the criticisms of how funds donate to unions and political parties. In his book Bad Egg: How to Fix Super, he slams not-for-profit and retail funds for what he says are significant conflicts of interest.

Under the new regulations, super funds will be required to list any goods or services that could be seen as an inducement to employers to use a particular fund as their default provider.

Disclosures will be required on any “offers to give or allow, a discount, allowance, rebate or credit in relation to the supply, or the proposed supply, of goods or services to a person, or a relative or associate of a person”.

Super fund sponsorships, marketing and promotion will also fall under the new disclosure spotlight.

Funds must list payments made for the “aggregate promotion, marketing or sponsorship expenditure relating to the entity”. This would capture such things as sponsorship of sports teams.

These additional disclosures are to be made in official notices of upcoming super fund meetings. That provides members with time to prepare some sticky questions for the funds’ senior executives.

Disclosures will also be published on super fund websites, giving interested parties an opportunity to scrutinise them.

The added disclosures are welcome as they force funds to demonstrate exactly how these expenditures of retirement savings are in the best long-term interests of their members.