Australian super funds that demonstrate leading practice responsible investment are taking a bigger share of the market and achieving stronger performance, according to a new study from the Responsible Investment Association Australasia (RIAA).
The fourth edition of RIAA’s Responsible Investment Super Study 2021, which presents the results of a biennial survey of Australia’s largest super funds, found that just one quarter of all Australian super funds are demonstrating leading practice responsible investment, yet they hold 42 per cent of total assets – up from 28 per cent in 2019.
The study also found that these super funds continue to outperform their peers financially, by 87 basis points over one year and 56 basis points over seven years. The average performance of leading responsible investment super funds’ My Super products is stronger than non-leaders over three-, five- and seven-year timeframes.
Not to be confused with ethical super funds (though sharing some values), responsible investment super funds are described by RIAA as:
- “Demonstrating commitment to good governance and accountability;
- implementing and measuring responsible investment approaches through activities such as engagement and voting and ESG integration;
- properly measuring outcomes, and;
- and having a high degree of transparency.”
RIAA’s CEO, Simon O’Connor, said: “This year’s report shows super funds that are doing responsible investment well are seeing their funds grow, leaving laggards at risk of losing market share.”
“Australians are realising the often-superior financial performance of leading responsible investment super funds and are moving their money to reap not only the benefits for society and the environment, but their retirement savings as well,” he said.
According to RIAA, greater gender balance on super fund boards is a hallmark of leading responsible investment super funds. While leaders only make up a quarter of total funds, they have 44 per cent of the total gender balanced boards.
Leading responsible investment super funds also employ a team of ESG/responsible investment staff, which helps them to deliver responsible investment in a more systematic manner than non-leaders.
The 13 Australian funds that are identified as leading responsible investment super funds are as follows:
- Active Super
- Australian Ethical Super
- Aware Super
- BT Superannuation
- Christian Super
- Mercer Superannuation (Australia) Limited
- Vision Super
If it’s not something you’re already aware of, doing your research to understand where your retirement savings are being invested is an important step in ensuring your super fund’s values align with your own. Of equal importance is to get in the habit of regularly comparing your super fund’s performance against that of others, to make sure it remains competitive.