Q. My husband and I would like to avoid investing in companies associated with coal, gambling, tobacco and the military. We have tried to ensure that our Superannuation funds do not have exposure to these investments. Getting any meaningful information out of our existing Superannuation fund has been very difficult. How can we check where our Superannuation funds are invested and how can we invest with Fund Managers who will not invest in these sectors?
A. Responsible investment is also known as Ethical investment, Sustainable Investment and Socially Responsible Investment. These broad terms refer to an investment criteria that incorporates pre-determined standards of environmental, social and governance standards to an investment above and beyond that of conventional investment selection.
Environmental criteria includes; pollution, climate change, water and resource scarcity. Social criteria includes; treatment of local communities, employees, and health and safety. Governance criteria includes; prudent management, corporate ethics and governance, corruption and morals.
Environmental, Social and Governance (ESG) criteria should arguably be considerations for any fund manager when assessing an investment, however with Responsible Investing an investor has the comfort of knowing that above and beyond a Fund Manager’s conventional assessment of an investment on the basis of future prospects and performance, ESG factors screen out investments that do not meet the predetermined standard.
Even if your Superannuation fund has investment options that have ESG criteria, identifying exactly where they invest your Super may be challenging. Especially where your Superannuation fund applies a “Multi Manager” or “fund of fund” approach to investing. These are investment options blended by the trustee of the Superannuation fund at their discretion. In these cases, it is hard enough to identify the managers they invest in let alone where those managers invest their funds.
The alternative is to invest in specific specialist managers either within your Superannuation fund, your Superannuation Investment platform (often referred to as Wrap Accounts) or directly via your Self-Managed Superannuation Fund. There are a range of quality investment managers available in the market who are not only Certified as being Responsible Investments but also provide a look through into their portfolios of exactly what stock they invest in. Recent portfolio holdings or top 20 portfolio holdings are usually available on the Fund Managers Websites.
The Responsible Investment Association of Australia (RIAA) website provides a list of investment funds that satisfy a standardised criteria to be certified as being Responsible Investments. For further information visit www.responsibleinvestment.org
To determine if you Superannuation fund meets your investment objectives, ask the Trustee to provide details of the companies your Super fund invests in. Determine if they have any Responsible Investment options available for you to invest in. If you are not satisfied with the results, shop around, there is substantial choice in the market. Whilst you may feel that ESG criteria are important to you, normal investment selection criteria should also apply to the fund in question; asset allocation, track record, risk adjusted return, independent research rating and their costs. You should always consider your personal circumstances; your investment timeframe and your appetite for risk before making any changes.