Ethical Super Series: A how-to-series to help you align your money with your values
Part 1: Super Makes Investors Of Us All
Ethical investing is moving from niche to mainstream as everyday Australians wise up to what super funds and banks are really doing with our dollars.
Future Super’s Ethical Super Series will explore the ins and outs of ethical superannuation and investment. Our aim is to empower ordinary Australians to invest more ethically.
With over $2 trillion being invested through superannuation, acknowledging that we all are investors is the first step on the path towards a more sustainable, ethical and prosperous future.
Australia is a nation of super investors
If you live and work in Australia, chances are you’re an investor.
You probably haven’t purchased a commercial building, a government bond, or a big parcel of shares in a company, yet these are probably things you partly own.
Australia is a nation of investors because of superannuation.
In the early 1990s the Keating government introduced a compulsory saving and investment initiative. He was worried everyday Aussies weren’t saving enough for retirement. Keating’s answer was to make it mandatory for employers to pay a portion of their employee’s wages into a special investment account that can only be accessed later in life.
The money in these special investment accounts is called superannuation, or ‘super’ for short. Super funds are responsible for investing that money on your behalf.
Even though 9.5% of each paycheck goes into super (going up to 12% by 2025), many Australians don’t realise they’re investors.
It’s easy to disengage with superannuation. Lots of people struggle to find accounts that were set up by previous employers. Super funds make investment decisions on our behalf, and are notoriously bad at engaging their members. Finance seems complicated. And anyway, we can’t spend our super until we’re old enough to retire, so super feels distant.
But that doesn’t change the fact that your super is your money. And it’s doing things in the real world, right now.
Ethical Superannuation and Investment: applying the values you live by to the money you’ll live on
Congratulations. Thanks to superannuation, you’re an investor.
Investing is putting money into a financial product, business or activity with the aim of achieving a return. To say it another way, investing is using money to make money. It’s what super funds do for you.
But what does it mean to invest your super ethically?
Ethics are the moral principles that guide our behaviour. Like a compass, we use ethics to navigate life’s many decisions, from personal relationships to the products we purchase.
An important idea in ethics is taking responsibility for the consequences of our actions, and acknowledging that the way something is done matters (which is to say that the ends don’t always justify the means).
If you care about healthy food, for example, it matters how your produce is grown, how it gets from the farm to your plate. If you care about fairness, you’ll want to know that the people who made your clothes have good working conditions and decent pay. If you care about sustainability, you’ll prefer to get your energy from clean renewable sources instead of harmful fossil fuels.
The ethical approach to investment simply means that in addition to returns, you also care about the real-world environmental and social impact of the companies you own.
As climate author and 350.org founder, Bill McKibben, says: “If it’s wrong to pollute, then it’s wrong to profit from pollution.”
When we make an investment, we’re also making an investment in the type of future we want. Do you want a future with more coal mines, nuclear weapons and poker machines? Or a world with more clean energy, affordable medicine and accessible education?
Do you want a future with more coal mines, nuclear weapons and poker machines? Or a world with more clean energy, affordable medicine and accessible education?
Some super funds are called 'ethical' or have a 'sustainable' option, but it’s not easy to work out what this means.
We think it’s important that super funds be upfront about their values, and transparent about where member's money is invested.
At Future Super we use a two-step ethical screening process to ensure your money is invested in companies that can both grow your super savings and build a better world.
Step 1 - “negative screening”.
Out with the bad: a negative screen rules out harmful and destructive industries like fossil fuels, detention centres, live animal export, nuclear, tobacco and more.
For many super funds, this is where they stop. They rule out a few ‘unethical’ investments that aren’t great for their reputation, and call it a day.
If you don’t think that’s good enough, look for a super fund that also includes a positive screen.
Step 2 - “positive screening”.
In with the good: a positive screen ensures we actively seek out companies that are doing social and environmental good, such as renewable energy, healthcare, education and IT.
At Future Super, our ethical research team constantly monitor the companies in our portfolio to make sure they match our values.
How to make your Super Ethical
Step 1: Know your values
Make a quick list of the issues you care about.
Here’s a few things we care about at Future Super.
- Eliminating reliance on fossil fuels
- Increasing clean energy
- Supporting new clean technology startups
- Investing in programs that create social good, such as the Aspire Social Impact Bond for people experiencing homelessness
- Reducing animal cruelty (no live animal export, cosmetic animal testing or factory farming)
- Supporting human rights by avoiding companies involved in running mandatory detention centres, for example
Step 2: Find out what your money is doing
Once you’re clear on your values, applying your ethics to investing can be as simple as asking two questions: what is my money doing and am I ok with that?
The first question should be easy to answer, right? In reality can be quite difficult.
The main issue is that super funds don’t have to tell you the specific investments they’re making on your behalf. Crazy, right? We believe you have a right to know what your super fund is doing with your money. That’s why Future Super discloses every single asset we invest our members money in.
To help make the super industry more accountable, we teamed up with The Guardian Australia to develop a web tool so you can find out what future your super is investing in.
Independent financial research NGO, Market Forces, also has a handy web tool called SuperSwitch which is exposes super funds’ connection to the fossil fuel industry. Future Super is proud to be the only super fund rated 100% fossil fuel free.
Step 3: Switch your fund
This is the easiest part.
If you want to join Future Super - Australia’s first 100% fossil fuel free ethical fund - the actual process is very easy. It’s online and takes about 2 minutes. You only need your basic personal details and your TFN.
Our awesome technology will find your accounts. You simply click on the ones you want to roll into your new Future Super account, and we do the rest. We’ll send you an email with the info you need to forward to your employer or set up your personal contributions.
Now you can sit back, relax, and enjoy the buzz you get from knowing you’re investing in a better future.
Step 4: Make a noise
The superannuation industry is very sensitive to feedback. When you roll over to Future Super, they know you’re choosing ethical super and rejecting their approach.
But, you can increase your impact by contacting the funds you left and telling them why. Give them a call, send an email, and post on Twitter or Facebook. It all counts.
Another thing you can do is tell your friends. The more people choosing to invest in a better future, the better that future can become.
Thousands have already chosen to dump fossil fuels and invest in a safe climate future. This is sending a signal to the big end of town, and that message gets stronger and stronger with every person who makes the switch.
As ethical investing grows, there’s less resources going to harmful industries and more going to programs and businesses that have a positive impact on people and the environment.
And the great news is that investing ethically can provide competitive returns. In fact, the most recent benchmark report from the Responsible Investment Association Australasia shows ‘core’ responsibly invested Australian share funds and balanced multi-sector funds have outperformed their equivalent mainstream funds over three, five and 10-year horizons.
Stay tuned to our Ethical Super series to learn more about how ethics can lead to superior returns.