Super funds look for ethical investments

Over 80 per cent of companies listed on the S&P/ASX200 are unable to demonstrate that the board holds responsibility for governing unfair business practices.

This is despite maximum fines of $10 million for organisations involved in price-fixing, bid rigging and insider trading.

According to Erik Mather, head of the BT Governance Advisory Service which conducted the research on behalf Australia’s largest super funds, “bad ethics is bad business”.

The research also found that less than half of companies fail to disclose their policy on protecting whistle-blowers.

In terms of fair trading and truth in advertising, only 52 per cent of companies are able to show their adherence to responsible marketing and promotion.

However, companies can now be fined up to $1.1 million where found to be engaged in misleading or deceptive conduct.

Bob Welsh, from VicSuper, said the study aimed to gauge the extent of a company’s business ethics for the companies in which they invested.

With almost $7 billion invested in Australian equities, the six super funds said they were obliged to ensure companies had systems in place to avoid potential regulation, litigation and reputation costs to shareowners — super fund members.

“On a global scale, we’ve seen companies driven into bankruptcy by damages claims from people harmed by their products - and the legal environment in Australia allows similar action to be taken against Australian companies,” said Welsh.

The Commonwealth Superannuation Scheme, Public Sector Superannuation, Catholic Superannuation Fund, NTGPass, VicSuper and Emergency Services Super are now calling on company directors to focus on promoting good business practices and to ensure compliance with competition laws.