Superannuation is a multitrillion-dollar nest egg, and where those retirement savings are invested can play a part in Australia’s path to net zero.
Australians have about $4.5tn invested in superannuation, according to the latest statistics from the Australian Prudential Regulation Authority.
“Superannuation is our largest pool of capital domestically,” says Ryan Cook, the sustainable finance program impact manager at Climateworks Centre.
Super funds invest in the real economy – the tangible goods and services that affect people’s everyday lives, he says, which means they can influence everything from the energy transition to infrastructure and industry.
In the past week, Australia’s third-largest pension fund, Aware Super, announced it would lift restrictions on investment in carbon-heavy companies, while UniSuper was accused of greenwashing after halving environmental criteria for its “sustainable” investment option.
With superannuation companies investing in fossil fuels and some funds accused of greenwashing, how can you green your super to ensure it benefits the environment?
Billions invested in fossil fuels
Most of Australia’s biggest super funds continue to invest in companies with plans to expand coal, oil and gas production, says Brett Morgan, senior superannuation funds analyst at Market Forces.
“We save our superannuation with institutions that we think we should be able to trust when it comes to managing our retirement savings,” he says. “Unfortunately, many of the companies that super funds often invest in can create significant harms for the climate and the environment.”
Collectively, the top 30 fund options have more than $33bn invested in fossil fuel expansion – more than three times the amount they invested in clean energy – according to Market Forces’ latest fossil fuel expansion index.
Of the 30, only one – Australian Ethical’s balanced option – had no investments linked to fossil fuel expansion.
Members prioritise environment and climate action
“A lot of people are very surprised when they find out what their super fund is invested in,” says Estelle Parker co-chief executive of the Responsible Investment Association Australasia.
RIAA’s research shows three-quarters of Australians want their bank or super fund to make a formal commitment to net zero by 2050, and 83% want them to commit to protecting biodiversity.
A recent global study suggests younger generations are even more interested in fund options that prioritise environmental and social issues. Nearly all surveyed gen Z (99%) and millennial (97%) investors said they were interested in sustainable investing, according to the Morgan Stanley Institute for Sustainable Investing.
“Your average 18-year-old is going to be retiring well after 2050,” Parker says. “So funds are thinking – what kind of world are our members retiring into?”
There are two main ways that super funds can influence companies in the climate change space, she says.
One is screening – the criteria funds use to choose which companies to invest in. That might exclude investments in fossil fuels, for example, or proactively invest in the energy transition.
Secondly, as investors in companies, funds can raise issues and vote at annual general meetings on behalf of members.
Australians are in the “driver’s seat” when it comes to their super, Parker says. They can choose where their savings are invested, and can talk with their funds about the impact those investments are having on the planet.
People can search the RIAA responsible returns directory to search for funds aligned with their values. That might include specific interests such as renewable energy, greener transport or sustainable fashion, or issues they want to exclude like nuclear energy, oil and gas exploration, or animal cruelty.
“They should do their own due diligence, of course,” she says. “Make sure they understand the strategy, make sure they understand what that fund is invested in. They should speak to a financial adviser if they can.”
Super funds are also required to disclose their investment holdings every six months, so members can find out everything that their fund invests in. From July, the sector will also be incorporated into Australia’s mandatory climate reporting.
Check green claims
Many major super companies have made public statements in support of net zero, and offer fund options labelled as green or sustainable.
But when product claims don’t stack up, funds can risk incurring financial penalties.
The federal government is now consulting on sustainable financial product labelling, to make sure the public understands the meaning of certain labels used for investments, especially when options are badged as “sustainable” or “environmental”.
Members make their voices heard
“Super fund decision makers must listen to what their members want,” Morgan says. “I would encourage members to contact their fund directly to find out what they’re invested in.”
If people aren’t happy, they can put pressure on their super fund to take bolder climate action, he says. Every time a member calls, emails or tags their super fund in a social media post, it has an impact.
An individual’s super balance can add up to hundreds of thousands of dollars. “It’s a big investment at the end of the day,” Cook says, so it’s worth taking the time to look at whether those investments align with your values, and your financial objectives.
A good option might be to check on your super at the end of the financial year, he says, around the same time as you’re doing tax.
• The information contained in this article does not constitute personal financial or other advice. People should seek their own advice tailored to their own financial circumstances when choosing or switching super funds.
