Are there ethical investing options in super?
Ethical investing has become a buzz term in recent years. It’s now far more common for all sorts of investments, including super, to offer ethical options that invest in assets doing less harm and more good for people, animals and our planet.
Does it apply to people like me??
Not all super funds offer ethical or sustainable options. But as more members look for this from their super fund, it’s definitely something you can expect to see in your choice of investment options going forward. In fact, most Australians (as many as 86%) expect their super balance to be invested ethically, even when they’re not choosing an ethical investment option. And around two thirds of people surveyed (67%) who don't currently invest in ethical companies, funds or superannuation funds are thinking about making the switch to ethical in the next five years1.
Is it better for my super balance?
The growing interest in ethical investing isn’t just motivated by doing good with our money. Up to 62% of Australians believe ethical or responsible super funds perform better in the long term. So is investing for the greater good, good for your super balance??
As with all investments in super, you can’t be certain of getting a better outcome just by choosing ethical options. And investing in ethical assets narrows down the range of options investment managers can choose between. But whether they call themselves ethical or not, many options in super already consider environmental, social and governance (ESG) issues as part of the bigger picture for investment risks and returns. If a company isn’t taking steps to cut carbon emissions, this could impact their growth and profits in a low or zero carbon economy.
"My clients tell me they’re very certain about making sure their super is invested according to their values. Of course, it’s important for me to make them aware that ethical investing means reducing the choice of assets they can invest in. And in the past, you might have been giving up some returns as a result of limiting your options. But today ethical choices can be on a par with other options in super." Alysia, Self-employed Financial Adviser.
What should I be looking for in an ethical investment option?
As with all super investments, you need to be confident you’re choosing options that suit your situation, timeframe and risk profile. And with the growing number of ethical options available, it’s important to understand if investments you’re choosing in super match your priorities for making a difference. Perhaps you’re looking to avoid investments in weapons and fossil fuels and support progress towards social justice and renewable energy? It’s important to understand that not all ethical investment managers operate the same. Different investment managers will use differing criteria for determining their ethical investments, with some more strict than others.
Get help with investment choices
We can help point you in the right direction and take steps to change your investments for the good or direct you to a financial advice professional who can talk through your goals and options for making the most of your super.
For financial advice you can depend on speak to the AMA Financial Services team on 1800 262 346 or email advice@amafp.com.au.
Further resources
AMA Financial Services Responsible and Ethical ESG Investment Philosophy, IOOF Research Team, on behalf of Consultum Financial Advisers Pty Ltd.
Responsible Investment Super Study 2021, Responsible Investment Association Australasia
1 Responsible Investing Association Australasia, From Values to Riches 2020 report.
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