Superannuation, a multitrillion-dollar nest egg, plays a critical role in shaping Australia’s journey towards net zero emissions. With approximately $4.5 trillion invested in superannuation, according to the Australian Prudential Regulation Authority, the decisions about where these funds are invested can significantly impact the environment.
Ryan Cook, the sustainable finance program impact manager at the Climateworks Centre, emphasizes the importance of superannuation as Australia’s largest pool of domestic capital. “Superannuation funds invest in the real economy – the tangible goods and services that affect people’s everyday lives,” he explains, highlighting their potential influence on the energy transition, infrastructure, and industry.
Super Funds and Fossil Fuel Investments
Recently, Australia’s third-largest pension fund, Aware Super, announced it would relax restrictions on investments in carbon-heavy companies. Meanwhile, UniSuper faced accusations of greenwashing after reducing the environmental criteria for its “sustainable” investment option. These developments raise concerns about how superannuation companies are investing in fossil fuels and the authenticity of their green claims.
Brett Morgan, a senior superannuation funds analyst at Market Forces, notes that most of Australia’s largest super funds continue to invest in companies with plans to expand coal, oil, and gas production. “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 $33 billion 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.
Members Demand Environmental Responsibility
Estelle Parker, co-chief executive of the Responsible Investment Association Australasia (RIAA), points out that many Australians are surprised to learn where their super funds are invested. RIAA’s research shows that 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 global study by the Morgan Stanley Institute for Sustainable Investing suggests that younger generations are even more invested in fund options that prioritize environmental and social issues. Nearly all surveyed Gen Z (99%) and millennial (97%) investors expressed interest in 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?”
Influencing Change Through Investment Choices
Parker outlines two main strategies that super funds can use to influence companies in the climate change space. The first is screening, which involves the criteria funds use to choose which companies to invest in, potentially excluding fossil fuels or proactively investing in the energy transition. The second strategy involves actively raising issues and voting at annual general meetings on behalf of members.
Australians have the power to influence their super investments. They can choose where their savings are invested and engage with their funds about the environmental impact of those investments. The RIAA responsible returns directory offers a resource for finding funds aligned with personal values, such as renewable energy or sustainable fashion, while excluding interests like nuclear energy or animal cruelty.
Ensuring Accountability and Transparency
Super funds are required to disclose their investment holdings every six months, allowing members to review where their money is going. From July, the sector will also be subject to Australia’s mandatory climate reporting, increasing transparency and accountability.
The federal government is currently consulting on sustainable financial product labelling to ensure that the public understands the meaning of terms like “sustainable” or “environmental” when applied to investment options. This initiative aims to prevent misleading claims and ensure that funds are held accountable for their environmental promises.
Taking Action for a Sustainable Future
Brett Morgan encourages members to voice their concerns directly to their super funds. “Super fund decision makers must listen to what their members want,” he asserts. Members can influence their funds by contacting them directly, whether through calls, emails, or social media interactions.
Ryan Cook advises individuals to regularly review their super investments, especially at the end of the financial year when they are also managing their taxes. “It’s a big investment at the end of the day,” he says, emphasizing the importance of aligning investments with personal values and financial goals.
The information contained in this article does not constitute personal financial or other advice. Individuals should seek their own advice tailored to their financial circumstances when choosing or switching super funds.
