WWF-Australia - for a living planet

Super for the future

Since 1 July 2005 many Australians now have a choice of super fund - that is, they can choose where their Superannuation Guarantee contributions paid by their employers are invested. Collectively our superannuation is being invested in a variety of ways - shares and property for example - but is that money being invested the way you'd like?

Sustainable Responsible Investment (SRI), which is also known as "ethical" or "socially responsible" investment, is one way to have your superannuation investments work for a sustainable future.

What is SRI?

Is your superannuation working for a sustainable future? © Scott DUNLAP

Is your superannuation working for a sustainable future?
© Scott DUNLAP

A sustainable responsible investment is one that takes into consideration social, environmental performance in addition to financial performance. Financial performance is still an important criteria, and research shows that some SRI funds perform as well if not better than non-SRI funds and indexes.1, but SRI places importance on other factors as well.

Some super funds include investment options that exclude companies that don't fit their criteria (e.g. an SRI option may exclude unsustainable forestry companies, or those involved in gambling or alcohol) - this is known in industry jargon as a "negative screen".

In addition to a negative screen, an SRI option may also actively seek out companies that are doing positive things for the environment or society (e.g. investing in recycling companies, sustainable energy, or schools) - this is called a "positive screen".

Another approach is known as a "best of sector" approach, which chooses the best companies within an industry sector to gain a balanced exposure to all sectors of the economy, whilst encouraging improvements in environmental and social performance. This approach may be combined with a negative screen in some cases.

Each approach has its pros and cons so you should seek advice from a licensed adviser (e.g. financial, tax, legal).

The case for SRI

As at 30 June 2004, Australian superannuation investments totaled more than $630 billion dollars2. Of that total $21.5 billion3, just 3.4%, is invested in SRI assets. As more people move their super into SRI options, SRI's influence will grow - meaning more investment in areas that are important to you, like the environment.

Investing is intrinsically about the future - our future, our family's future - and if environmental issues are important to you, choosing the right SRI option means you can invest your super for a sustainable future, reaping environmental as well as financial dividends.

Find out more

A growing number of SRI options are available within super funds. The Ethical Investment Association has a superannuation guide which explains SRI options and how to get started. They also provide lists of available SRI options and details of financial advisers with specific knowledge about SRI.

Links and resources

Notes

  1. Sunday Age, 2 October, 2005 - 'Does virtue pay or is vice the way?': "Based on data from Morningstar and investment consultant Mercer, the [AMP Capital Investors 2004] study put average SRI fund three-year returns to end June 2004 at 5.2 per cent, compared with 4.4 per cent for the ASX 200 Index. For the five years to June 2004, the average SRI fund was ahead by 6.6 per cent, compared with 5.6 per cent on the ASX 200. One-year returns to June 2004 put the average SRI fund behind at 21.2 per cent compared with 21.6 for the ASX 200." (Source)
  2. APRA Statistics - Annual Superannuation Bulletin June 2004 (PDF 604 KB): "Total superannuation assets increased by 17.3 per cent during the year to 30 June 2004 to stand at $630.9 billion."
  3. EIA Socially Responsible Investment in Australia - 2004 (PDF 208 KB): "Nearly all forms of socially responsible investment (SRI) in Australia continued to grow dramatically over the past year - rising to at least $21.5 billion by 30 June 2004."