Craig Brooke from KeyInvest speaks to James Dunn from The Inside Network on finding the cream of private credit crop. The Inside Adviser
Clearview and trustee ETSL have raised eyebrows and confused advisers by shifting the popular WealthFoundations super and pension product to investment platform provider HUB24. “It’s like a power plant being run by a battery,” says adviser Jason Poole. “It makes no sense.”
Super investments can make a big difference to climate
Superannuation investments can have a big impact on the climate, and superannuation funds are increasingly offering investors more climate-friendly investment options, which according to recent research can be more effective in combating climate change than changing our daily behaviours.
The momentum for more environmentally friendly investments is rising. While the Association of Superannuation Funds of Australia (ASFA) doesn’t keep data on the combined value of money invested in sustainable or environmental, social, and governance (ESG) super funds, the Australian responsible investment market was valued at $1.28 trillion in 2020, including superannuation, according to the 2021 Responsible Investment Benchmark Report, published by the Responsible Investment Association Australasia (RIAA).
Importantly, that report found that in 2020, responsible investment funds performed on par with, or better than, the market, even though overall fund performance was down largely due to the impact of COVID-19 on economies worldwide.
Moreover, Australians increasingly want their retirement money to be invested responsibly. Another study by the RIAA has found that three in five (61 per cent) Australians would be motivated to try to save and invest more money if they knew their savings and investments made a positive difference in the world. This is an eight percentage point increase on two years ago in 2020, when 53 per cent said they would save harder. Moreover, four out of five Australians (83 per cent) expect their super to be invested responsibly and ethically.
“We are continuing to see Australia’s largest superannuation funds – including industry, retail, corporate and public sector funds – ramping-up engagement in responsible investing to drive superior financial performance, reduce risk, and deliver better outcomes for members and beneficiaries,” said Simon O’Connor, RIAA’s CEO.
According to the RIAA’s Super Study 2021 report, a quarter of super funds (13 out of 53) are leading responsible investment super funds and they implement and measure responsible investment approaches. Together, the leading responsible investment super funds held 42 per cent of total super assets as at June 30, 2021
Industry funds lead the charge
HESTA was the first big super fund to commit to net zero by 2050, implement restrictions on investment in thermal coal, and be certified as carbon-neutral for business operations.
HESTA’s Sustainable Growth option is one of the country’s top-performing balanced options for the year, leading across one, three, five, seven, ten and 15-year timeframes over the period to June 30, 2021, according to SuperRatings’ 2020-21 Fund Crediting Rate Survey. The Sustainable Growth investment option achieved a 23.0 per cent return for the 2020-21 financial year and delivered 11.3 per cent per annum over a rolling 10-year period.
UniSuper, which manages $100 billion in superannuation funds, has committed to net-zero emissions by 2050, and just 0.4 per cent of the fund was exposed to fossil fuel producers as at August 2021, with overall fossil fuel exposure down to 2.55 per cent from 5.05 per cent a year earlier.
UniSuper says demand for its three dedicated ESG investment options, which are designed to avoid investments in companies involved in the production, generation, or transmission of coal, oil or gas, is strong, with over $12 billion in funds under management across these options.
Unisuper’s Global Environmental Opportunities (GEO) option is also a strong performer. The fund invests in companies which earn most of their revenue from providing environmental solutions. It has been Unisuper’s top performing super option over the three years to 22 February 2022, with returns of 19.1 per cent p.a. and is also its best performing option over five years, with returns of 16.9 per cent p.a.
Chief investment officer John Pearce said super funds and the actions of large investors are key to decarbonising the economy. “We strongly believe that engaging with companies and helping them progress toward these targets represents a more meaningful contribution to achieving the Paris goals than divestment – which effectively transfers fossil fuel exposures,” Pearce said in UniSuper’s “Climate risk and our investments” report.
“There is no doubt in my mind that the collective action of large investors like UniSuper has played a significant role in driving that behaviour. We strongly believe that engaging with companies and helping them progress toward these targets represents a more meaningful contribution to achieving the Paris goals than divestment,” he said.
A big impact through super
Lifestyle changes like eating less meat and driving an electric car are common ways people use to cut their carbon footprint. But what’s less well known is that by switching to sustainable superannuation funds, we can save significant amounts of carbon emissions.
Last year, research conducted in the UK by Make My Money Matter, Aviva and Route2 revealed that adopting a sustainable pension could be the most effective action individuals to help combat climate change. Their research found that those with an average-sized pension pot of £30,000 in the UK pension system who moved from a traditional global equities fund to a equity-focused sustainable option could expect to save 19 tonnes of carbon a year. The same shift for savers with a larger pension of at least £100,000 could save up to 64 tonnes of carbon, equal to nine years’ worth of the UK citizen’s average carbon footprint.
According to that research, moving the average UK pension to the sustainable equities fund was 21 times more effective than the combined annual carbon savings of switching to a renewable electricity provider, substituting all air travel with rail travel, and adopting a vegetarian diet.
