Investing sustainably for a brighter financial future
‘Sustainable investing’ has been an important feature of the superannuation industry for some time now, although the concept has expanded and become more mainstream over the years.
These days, more Australians than ever are considering the power of the trillions of dollars invested in the super system and their potential to have a real impact on our futures. Issues such as climate change and social activism now dominate our news headlines, and people around the world are becoming increasingly aware of where their money is being invested.
As a super fund, it’s our responsibility to protect and maximise super savings for members. In fact, we’re legally bound by the ‘sole purpose’ test which means we can only exist for this reason.
So, with record numbers of Australians wanting their money invested more sustainably, how can super funds meet these increasing demands while ensuring we’re always acting in our members’ best financial interests?
Integrating super and sustainability
One of the most challenging (and interesting) aspects of sustainable investing is that it’s a constantly evolving practice. Traditionally, it’s been thought of in terms of risk aversion – a way of investing that considers environmental, social and governance (ESG) risks and their potential impact on investment returns.
Environmental factors commonly assessed include climate change, pollution, energy efficiency, waste management and conservation, while social factors tend to be an evaluation of how a business treats its workforce, suppliers, customers and the community. Key governance considerations focus on issues like diversity, leadership, culture and behaviour.
In practice, investment managers look at these risks and how they might affect the value of an asset over the short-to-long term. For example, government regulations may change as we collectively aim to reduce emissions. If a carbon tax is introduced, the long-term investment returns for carbon-intensive industries are unlikely to be strong, and investors may choose to not invest, which would affect the future value of investments in these industries.
At CareSuper, we use a range of specialist investment managers across different asset classes and, before deciding to invest with them, we assess their ESG capabilities. Once appointed, we regularly review their processes to ensure they maintain high ESG risk management standards.
We exercise our voting rights at company meetings and use our influence to support positive corporate behaviour and drive improved ESG practices. As well as working with several peak bodies and organisations to share knowledge, grow awareness and support ESG initiatives, we are also a proud signatory of the United Nations supported Principles for Responsible Investment (PRI) and participate in the annual PRI reporting framework. We measure our responsible investing activities against the results of this report each year.
Offering dedicated sustainable options
More recently, investors have started to think of sustainable investing not only in terms of avoiding risk, but also in terms of the positive impact investments can have on people and the planet.
Super funds are evolving as a result, with several now offering dedicated portfolios for members who want a greater focus on sustainability.
At CareSuper, our award-winning Sustainable Balanced option is managed by specialist investment managers who apply both negative screens and positive themes to the investment selection process.
We manage risk while actively searching for companies that will perform well financially and at the same time making a positive difference in the world.
Our negative screens include avoiding investing in areas considered harmful, such as tobacco, child labour and controversial weapons, and we also avoid investing in companies that have material exposure to thermal coal production and animal testing.
As for positive themes, we actively seek out investments we believe will have a positive impact and provide strong long-term results. For example, we invest in companies that help reduce waste, improve energy efficiency, address financial inequality or lead to greater healthcare outcomes. In our view, investments that exhibit these positive characteristics are more likely to provide strong growth in the future, which, importantly, means we can invest in these assets in our members’ best financial interests.
Investing sustainably with long-term returns
While sustainable investment options might perform differently to other options because of the very specific sectors that they invest in, at CareSuper we don’t believe there is a need to sacrifice returns.
In fact, we adopt an integrated approach to sustainable investing because we believe it makes good financial sense.
The results of our CareSuper Sustainable Balanced option speak for themselves. It was awarded the Lonsec Investment Option Award in 2021 and according to SuperRatings, the option has been a top-performer over the long-term, delivering a return of 8.24% over 10 years to February 2021.*
While we’re pleased to have delivered strong long-term results, our objective is to continually improve and evolve. We’re working to continue to enhance our sustainable investment offering to our members, while always acting in their best financial interests.
Tips for members and employers
Whether you’re an employer deciding on a super fund to partner with or a member looking to invest more sustainably, sustainable investing means different things to different people, so it’s worth doing some research to see what choices are available that align with both your financial needs and your values.
A good place to start is the fund’s website and product disclosure statements, which should set out the objectives, risks and long-term returns of all investment options, as well as information about the fund’s responsible investing initiatives and policies.
To find out if CareSuper is the right fit for you, learn more about how we invest, what our Sustainable Balanced option offers and read our Responsible Investing Policy and Climate Change Position Statement.
To find out more about CareSuper and our investment options call us on 1300 360 149 or visit our website.
If you’re an employer and want to continue to be informed, fill in your details and we’ll be in touch.
* SuperRatings Sustainable Fund Crediting Rate Survey 28 February 2021.