By guest author John Collett, who writes about personal finance for The Sydney Morning Herald and The Age.
We tell survey after survey that we care about the environment, we buy products that are environmentally friendly and are happy to move to paperless bills, but we continue to remain reluctant to switch our retirement savings to superannuation funds that invest ethically.
When it comes to walking the talk, with the exception of the highly motivated, we baulk at funds or other types of investments that have clearly articulated policies to help deal with climate change.
AustralianSuper’s socially aware investment option, for example, holds just AUD 2.4 billion invested on behalf of 38,000 members – less than 2 per cent of the AUD 172 billion in assets under management for Australia’s largest super fund.
However, there are some signs that more people are prepared to make the switch after the bushfires that devastated the eastern states over the summer raised awareness of a link to climate change.
Searches on the Responsible Investment Association Australasia’s (RIAA) site, responsiblereturns.com.au, doubled in January compared with a month earlier, which Simon O’Connor, the association’s chief executive, attributes to the bushfire disaster.
“A whole lot of Australians are joining the dots between the bushfires and climate change and are starting to think about where they direct their super,” Mr O’Connor says.
Australia Ethical Super saw five times the net inflow in January, compared to the same month a year earlier, which the fund attributes to increased awareness of climate change after the fires.
Australian Ethical is a pioneer “deep green” manager of not only super but also cash through its managed funds.
One of the reasons for the reluctance to switch to ethical super identified by earlier RIAA surveys is a belief that investing ethically means sacrificing financial performance.
However, the latest RIAA study, commissioned with financial support from Australian Ethical, finds six out of 10 people polled now believe ethical or responsible investing funds perform better over the long term – double the proportion compared to the last time the question was posed in 2017.
Three quarters say they would consider moving their banking and super to providers that invest ethically, with environmental issues their greatest concern.
That signals a clear warning to mainstream super funds – and to the finance sector generally – that they should better reflect the preferences of their investors, Mr O’Conner says.
The RIAA survey found 66 per cent of people believe there is a lack of credible ethical and responsible superannuation options to choose from.
Kent Kwan, co-founder and chief executive of newly launched Elevate Super, which invests in sustainable businesses, says many people, particularly the young, “view super as an unimportant and ineffective asset”.
Lack of engagement with our super remains a big obstacle to change.
Many of us are unfamiliar with our super fund or its balance, let alone seeking out ethical funds or choosing a sustainable option in our existing fund.