Australian superannuation funds following environmental, social and governance (ESG) principles collectively manage over $1.6 trillion, according to a new study.
Rainmaker Information’s inaugural ESG Superannuation Taxonomy Study found this amount of funds under management is equivalent to 71 per cent of the superannuation savings overseen by the Australian Prudential Regulatory Authority (APRA).
Furthermore, this means Australia's ESG superannuation coverage ratio is among the highest in the world.
"The purpose of the study was to explore what it actually means to be an ESG super fund," Rainmaker's director of research, Alex Dunnin, said.
"With so many people talking about ESG and so many super funds and investment managers claiming to be ESG proponents, it's important for investors that we develop markers of what this actually means.
“When people are looking to join an ESG super fund, we want to help them know what to look for."
In developing the research to support the study, a framework was created to capture what it is about ESG super funds that makes them different.
Assembling these markers in-turn enabled the researchers to acknowledge which super funds display the most of these ESG proof points.
The proof points include which funds:
- declare themselves to be committed to ESG principles;
- publicly state their values;
- are affiliated with which ESG protocol groups;
- disclose their portfolio holdings, proxy voting policies and voting records;
- declare their investment screens (the criteria they use when making investment decisions), and;
- report their ESG, climate change and social impacts and carbon footprints.
The research identified 60 super funds as being an ESG super fund, which is approximately one-third of all super funds.
"While ESG investment principles are incredibly important, they do not override the super fund trustees' fundamental obligation to maximise their fund members' best interests by achieving the highest investment returns they can," Mr Dunnin said.
"Super funds should adopt ESG principles because it makes them better super funds. Super fund trustees must always focus on the financial best interests of their members."
Rainmaker's ESG Superannuation Taxonomy Study revealed Australia's top 20 ESG super funds that scored the highest in the inaugural study to be:
|Australian Ethical Super||legalsuper|
|AustralianSuper||Local Government Super|
|Aware Super||Media Super|
|CareSuper||Mercer Super Trust|
|Catholic Super||Mercy Super|
|Cbus Super||Prime Super|
|Future Super||Super SA|
Source: Rainmaker Information
Mr Dunnin said that while the impacts on the climate is a significant aspect in ESG investing, there are many other factors for funds to consider.
“Trustees of ESG super funds have to weigh up how they wish to impact the market and the companies with which they are engaging,” he said.
Comparing responsible super funds
If you’re considering making the switch from your current fund to a more ethical super fund that aligns with your values, it might be worth doing your research to find out exactly what kinds of investments each fund prioritises.
Additionally, it’s important to weigh up other factors when choosing a new super fund to ensure you’re making the best move for you and your retirement. Some of the features to consider when making your superannuation comparison include:
- Investment options
- Investment performance
- Insurance options
- Customer service