Over the past couple of weeks, I’ve dived head first into the incredibly daunting topic that is superannuation. The only reason that I haven’t already drowned in the deep waters of super information yet is that I’ve been breaking super topics down into smaller posts so that we can actually wrap our heads around it. If you haven’t already, be sure to check out my first two posts in this SUPER SERIES:
Once you’ve done that, pour yourself a glass of bubbles (like we have below) and put your feet up because we are about to start digging deep into what the hell super funds are actually doing with all of our money.
If you’ve been reading my blog for a while, you’ve probably heard me mention that I live in the inner-west of Sydney. What the hell does that have to do with anything? Look I don’t have any official statistics, but if you’ve been to the area, I’m sure you’re well aware that the inner-west is probably one of the most progressive areas in Australia. We love a good protest, we’re all about social inclusion and, as my Nan likes to say, we’re a bunch of ‘environmental hippies.’ It’s not just my inner-westie friends that care about these big issues though. Young people around Australia are placing more and more emphasis on ethical consumerism, meaning we’d rather spend our money on ethically-made goods than on brands that thrive on environmental pollution, exploitation of their workers and/or animal cruelty. In fact:
73% of millennials are willing to spend more for sustainable goods*
So, why should super be any different? If you’re passionate about where your money is, and what you’re using it for, then is it time for you to be investing your super ethically too?
What Does It Mean To Invest Ethically?
Investing your money ethically means that you’re not just thinking about how much money you’re going to make from that investment. It means that you’re also actively weighing up the social and environmental factors associated with that investment to ensure that all of those factors align with your personal values.
What Is An Example of An Ethical Investment?
When you hear people talking about ethics, it’s understandable to have some questions. I mean, just because I consider something to be ethical, doesn’t necessarily mean that everyone else will agree with me (hellllo, my Nan just called us a bunch of ‘environmental hippies’ ffs). There’s no set definition of what it means to be ethical, and there’s nothing stopping super funds from calling themselves ethical either. For example, Christian Super is an ethical fund that refuses to invest in companies involved in the production of abortion pills, IUDs and oral contraceptives. For some people, that might align perfectly with their ethical values, whereas it might not sit so well for others.
That being said, there are some pretty standard investments that most super funds agree are actually pretty ethical. Clean energy investments, for example, are obviously an ethical investment. Live animal exports, however, ugh not so much. Other examples of ethical investments can include:
All super funds must provide information on their ethical position. So it’s important that you do the research before you decide to invest ethically.
Here’s some links on the ethical position of some major super funds:
– Hostplus Investment Governance
– HESTA Responsible Investment
– UniSuper Responsible Investing
– CBus Sustainability
– Australian Ethical Approach
– Australian Super Environmental, Social and Governance
– Prime Super Investment Governance
– Mercy Super Socially Responsible Option
How Do Super Funds Decide Whether An Investment Is Ethical?
There are two common ways in which super funds decide whether or not an investment is ethical: negative and positive screening.
This is when a super fund excludes certain investments like companies that profit from militarism and weapons, tobacco, gambling, pornography etc.
This is when a super fund actively seeks to include certain investments that align with it’s ethical position. A super fund, for example, might search for companies that have good workplace practices, promote diversity in the workplace and produce sustainable products.
Will These Ethical Funds Make Me Money?
Look, the whole point of super is to grow your money enough so that you can retire comfortably. It’s all well and good to invest your money ethically, but what would be the point if those investments didn’t make you any money? That’s why I did a little research into whether or not these ethical investments have decent return rates. Over the past 3 years:
– The Hostplus Socially Responsible Investment (SRI) option returned 4.37%, compared to the Balanced option which returned 4.25%
– The HESTA Eco Pool returned 7.39%, compared to the default Core Pool which returned 5.84%
– The UniSuper Sustainable Balanced option returned 8.06%, compared to the Balanced option which returned 6.97%
– The Australian Super Socially Aware option returned 4.83%, which underperformed the Balanced option which returned 6.65%
– The Australian Ethical Balanced account returned 6.40%
So, in answer to whether or not these funds will make you money, of course they bloody will. In fact, a lot of these ethical investment options are making even more money than other account options. Of course, you have to remember that past performance is never an indicator of future performance. Like all other investments, ethical investments have the risk of decreasing in value, so it’s impossible to know if these accounts are going to under or outperform the other accounts in the future. Either way, these funds are still going to make you money.
How To Invest Your Super Money Ethically
A study conducted in 2017 by The Responsible Investment Association in Australasia found that 69% of Australians would rather invest in an ethical super fund than in a super fund which is only interested in maximising financial returns, yet only 22% of Australians say that they are already invested in ethical companies.
So, before you get your knickers in a knot over whether or not your super money is actually being used to fund human trafficking and live animal exports, I wanna talk to you about the two ways that you can ensure your super aligns with your values.
1. Change To The Ethical Investment Option That Your Fund Offers
When you sign up for a super fund, your money is automatically invested into the default account option. What most people don’t know, however, is that you have the option to move that money into an ethical investment option if you desire to do so. In fact, I just moved 50% of my super from the default Hostplus Balanced option into the Hostplus Socially Responsible Investment Balanced (SRI) option. This option:
– Does not invest in companies that mine the most emissions intensive fossil fuels
– Does not invest in companies that use the most energy to process a fossil fuel
– Refuses to invest in companies that burn brown coal to generate power
– Excludes companies that make a material amount of money from nuclear power
– Won’t invest in companies that make more than 10% of their sales from alcohol, gambling and/or pornography
To change my investment option I:
1. Logged into my super account
2. Clicked on the Investments tab
3. Clicked to switch my investment type
4. Chose the percentage of my fund that I wanted to switch (see below)
The whole process took me less than 10 minutes and I am sure that it’d be just as easy to do it with any other super fund.
2. Move Your Money To An Ethical Super Fund
There are four funds that describe themselves as completely ethical – Australian Ethical, Christian Super, Future Super and Local Government Super. Let’s take a look at Australian Ethical as an example. This fund states that it:
– Avoids companies that restrict human rights, discriminates or exploits workers
– Invests in renewable energy
– Refuses to invest in live animal exports
– Generally avoids investing in the mining sector
– Takes action to limit global warming
If one of these funds aligns with your ethical values (please please read their fine print before making this decision) and you do decide that ethical investing is your thing, then it’s pretty easy to make the switch.
1. Choose your new super fund
2. Fill in an online sign-up form on this new fund’s website
3. Roll over the super from your old fund into the new fund (you have the option to do this when you sign up to the new fund or you can use this form)
4. Inform your employer by giving them this form
Aaaaand it’s as easy at that, folks.
*Source: The Nielsen Global Survey of Corporate Social Responsibility and Sustainability
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The Stingy Bitch
Based in Sydney, Australia.
Created in 2020.
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