Author: Leigh Jobling, Partner, Investment Advisory & Wealth
Ethics is a subjective idea, what is ethical for one person, may not be the same for the next. An ethical super fund is a fund where the money is invested in industries that are considered to be ethically responsible. They are typically industries that meet certain Environmental, Social and Governance (ESG) standards (usually determined by the investment manager).
Typically, ethical funds screen out fossil fuels, weapons, tobacco, logging, animal cruelty and companies that have been implicated in human rights abuse or worker exploration issues. However, the degree to which certain super funds screens positively or negatively in each of these areas will vary.
Why do people choose ethical funds?
It seems like a silly question, but where you put your money impacts economic and commercial developments into the future. Without specifically switching to an ethical super fund, you may be investing in companies whose work does not align with your personal values. When you consider the superannuation industry alone is worth over $3 trillion, that’s a lot of money that can be used to make a difference.
What to look for?
A simple way of finding out if your super fund is ‘ethical’ or ethically in line with your values is to ask them. Alternatively, websites like Finder, Choice and RateCity have comparison pages where you are able to obtain more details on a Fund’s investment screens, returns and fees.
It is worth noting that the Responsible Investment Association Australasia (RIAA), the peak independent non-government body representing responsible, ethical impact investors across Australia and New Zealand, have only certified four super funds providers as ethical. However, other individual investment funds can still be deemed as ethical and be a valuable option for consideration.
What are the dangers?
Recently there’s been a growing concern, by the regulator (ASIC) of the potential for Fund managers to greenwash and exaggerate or mislead customers about their commitment to ESG factors. A fairly straightforward way of determining if a super fund is actually investing ethically is to look at its portfolio holdings to determine if you are happy with the companies you are invested in.
If you are concerned about your investments, or have any questions, please contact us on 03 9886 0800 or via email.
What should you do now?
Ethical Portfolio Option
At TAG we have developed an Ethical Diversified investment option to assist you in your ethical journey. Please contact our advisers for an in-depth discussion.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686).Copyright 2021. Please do not reproduce without the expressed written consent of the author.