Responsible investing: how to make your super match your values

Australians want their super to be invested responsibly. And super funds are giving them that option.

Are you happy with how your super is invested? Do you even know which industries your super is invested in?

Eighty-eight per cent of people say they expect their super to be invested responsibly or ethically. Credit: iStock

Karen McLeod, a financial adviser with Ethical Investment Advisers, says a good first step for anyone interested in finding out more about whether their super aligns with their values is to do some research.

“Just have a look online and see the holdings that your super fund has, and maybe do some internet searches to see if you feel happy with those companies,” she says.

You may find that your super and your ethics are not exactly in sync. Your money might be invested in fossil fuel companies, arms manufacturers, or even social media giants that you’re not particularly fond of.

The exercise can be interesting not just in what it reveals about your super fund. It can also help you crystalise exactly what your own values are and how you can direct your investments accordingly.

“What’s the future you want to invest into?” McLeod says. “Perhaps think about how you could allocate your funds that way.”

You might also think in terms of justifying your holdings to your children or grandchildren, McLeod says. “How good would you feel if you knew you were actually investing in a future that they want to be a part of?”

Growing awareness

Australians are more aware of responsible, or ethical, investing than ever; 78 per cent are familiar with it, up from 50 per cent in 2020, says the Responsible Investment Association Australasia (RIAA) report From Values to Riches 2024.

Eighty-eight per cent of people say they expect their super to be invested responsibly or ethically. “With a growing sense of urgency,” the report says, “Australians are demanding a more responsible and ethical approach from financial institutions.”

Mainstream super funds are responding to that demand by offering a growing selection of responsible investment options. Colonial First State offers up to 14 sustainable investment options, says its chief investment officer, Jonathan Armitage.

“These sustainable options adopt a wide range of strategies and approaches,” he says, “including the application of negative and positive screens to exclude or include certain companies based on a range of factors.”

The Thrive+ Sustainable Growth fund, for example, positively invests in 10 themes, including sustainable fashion and renewable energy, while screening out fossil fuel investments.

If that’s not up your ethical alley, you can choose investment options that screen against themes such as gambling, tobacco or weapons, or positively invest in sustainable agriculture.

Huge range

If you’re looking for a responsible investment product, it’s important to understand that the term “responsible investing” covers a huge range of approaches, from funds that simply assess ESG (environmental, social and governance) risk factors in their investment decisions to funds that negatively or positively screen certain issues, or focus on impact investing.

The terms responsible, sustainable and ethical investing are often used interchangeably, which doesn’t help.

“Colonial First State research has found Australian consumers are confused by sustainability claims and can’t differentiate between different ESG investment options,” Armitage says. “These findings highlight the need for industry, regulators and government to continue to work together in the development of consistent consumer labelling standards.”

Despite the confusing terminology, people are moving their money (or at least thinking about it). According to the RIAA report, almost one in five Australians (18 per cent) say they are already investing on the positive end of the responsible investment spectrum: in ethical companies, funds or super funds that aim to create positive social and environmental impacts.

That figure is up from 13 per cent in 2020, and may be about to rise further, with 55 per cent of people saying they are considering investing ethically in the next five years.

Curious investors can use sources such as the RIAA’s www.responsiblereturns.com.au to find independently certified responsible funds. And, says the RIAA’s co-CEO, Dean Hegarty, they can also pick up the phone and ask their super fund some pertinent questions.

“Ultimately, there are plenty of third-party-verified, high-quality options available to Australians to choose today that will allow them to align their investments with their values,” he says. “Contact your super fund and ask what kinds of ethical options they have. Or if there’s a specific issue that’s important to you, like animal welfare, ask them how they think about it when they invest.

“If you don’t like their answer, contact another one and change. It doesn’t take long and given how long you’re going to be invested in super it’s well worth it.”

To learn more, visit cfs.com.au