You would like your superannuation savings to be committed to stuff that also serve the planet's long-term interests. But how how can you tell your fund's values align with yours – or perhaps its own claims?
This question is becoming increasingly pertinent as interest in environmentally and socially sustainable investments grows – with it incentives for financial institutions to put the very best spin on their offerings.
One consultancy specialising in “responsible investment” reckons 10% of the funds it has examined don't have the sustainability orientation they're saying.
Among those accused of greenwashing recently is among Australia's biggest super funds, HESTA (the fund for health and community service workers), that has promoting its “clean energy” credentials while still holding shares in fossil-fuel companies Woodside and Santos.
So how will you check what your superannuation fund invests in?
Super money is legally obliged to disclose the way they invest your hard earned money in 2 different disclosure documents – an item Disclosure Statement and a Portfolio Holdings Disclosure.
Both will be available on an excellent fund's website, though how easily you can find them will be different.
The rest of this information is likely to explain what information these documents provide, how useful this post is likely to be, and your best bet to ensure your super fund reflects your values.
The Product Disclosure Statement
Product disclosure statements are required by the financial regulator (the Australian Securities and Investments Commission) for all financial products.
This document outlines the standard but information of an investment product's features, benefits, risks and charges, including taxes and fees. The format is standardised, with one section (Section 5) covering with “How we invest your money”.
The information it contains is broad. At best you'll learn how the fund splits its investments between safe and riskier assets, and between different asset classes – Australian shares, international shares, property trusts, infrastructure trust, cash and so on.
Portfolio Holding Disclosure
For a comprehensive take a look at where your money is committed to, you can consider the Portfolio Holdings Disclosure.
This document lists a fund's complete holdings – including the percentage and cost of each and every single company stock held.
Portfolio holdings disclosures are relatively recent, being obligatory only since March 2023 under legislation meant to improve transparency in the sector.
However, super funds aren't obliged to provide these details in a consistent, easily understandable way.
For a non-expert who doesn't understand what to consider, the amount of detail can be mind-boggling. You might find yourself scrutinising a spreadsheet listing a large number of items.
The Australian Retirement Trust's Portfolio Holdings Disclosure for its “Lifecycle Balanced Pool”, for instance, has a lot more than 8,000 line items.
Some super funds have made the effort to provide these details in a more user-friendly format. A good example is Future Super, which lets you search and filter portfolio holdings by asset class and country of origin.
But if your concern is to avoid investing in some specific activity such as in mining fossil fuels or gambling, you'll need to know the companies along with other assets you want to avoid with this to become helpful.
Your best options
This is not to state portfolio holding disclosure obligations are useless. They're incredibly useful – a huge leap forward within the sector's accountability. They simply aren't created for consumers.
So there's still much try to be achieved to help make the sector truly transparent.
What would really assistance is independent certification and ratings of super products, similar to government websites and programs that certify energy efficiency and permit comparison of electricity plans.
In the meantime, I can provide you with one big tip.
Choose a specific superannuation product which markets itself on its environmental or social sustainability credentials. Most super funds now provide these choices alongside their classical investment options.
There is a variety of “screening” methods to ethical investments. Some exclude entire sectors. Others range from the best environmental and social performers even among “sinful” industries for example tobacco or weapons.
So must be super product is marketed as “ethical” or “sustainable” doesn't guarantee you will agree with all of its investments.
But there's a much higher likelihood of it living up to its claims because of greater scrutiny by organizations such as environmental groups as well as the financial regulator.
The Australian Securities and Investments Commission put super funds on notice captured having a “guidance note” about the growing risk of greenwashing in sustainability-related lending options.
It reminded funds that “making statements (or disseminating information) which are false or misleading, or participating in dishonest, misleading or deceptive conduct with regards to an economic product or financial service” is prohibited.
So super funds know their portfolios are being scrutinised.
Switching neglect the option or fund now is easier than you believe. You only need to complete and lodge an application. Be sure that you compare fees and gratifaction, and seek another opinion from trustworthy adviser before “voting with your wallet”.
This article is republished in the Conversation. Read the original article.
