Responsibly investing super funds outperform peers

responsible investment association australasia PIMCO Active Super Australian Ethical Super AustralianSuper aware super BT Superannuation CareSuper Cbus christian super HESTA Mercer Superannuation REST unisuper Vision Super

2 December 2021
| By Oksana Patron |
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Super funds that invest responsibly are taking a bigger share of the market while financially outperforming their peers, according to the survey the Responsible Investment Association Australasia (RIAA).

The RIAA’s Responsible Investment Super study 2021 study, sponsored by PIMCO, confirmed that one-quarter of super funds demonstrated leading practice responsible investment and, at the same time, they held 42% of total assets, compared with 28% in 2019.

However, the majority (77%) of Australia’s largest super funds still had work to do in terms of transparency if they were to meet new legislative requirements to disclose their portfolio holdings publicly in 2022.

There were  13  funds which were identified as leading responsible investment super funds for demonstrating commitment to good governance and accountability; implementing and measuring responsible investment approaches through activities such as engagement and voting and environmental, social, governance (ESG) integration; properly measuring outcomes; and having a high degree of transparency.

These were Active Super, Australian Ethical Super, AustralianSuper, Aware Super, BT Superannuation, CareSuper, Cbus, Christian Super, HESTA, Mercer Superannuation (Australia) Limited, Rest, UniSuper and Vision Super.

The Super Study also showed that super funds that implemented leading practice responsible investment continued to outperform their peers financially (87 basis points over one year and 56bps over seven years) and the average performance of leading responsible investment super funds’ My Super products was better than non-leaders over three-, five- and seven-year timeframes.

Also, 92% of funds indicated that climate risk is actively assessed at a trustee/board level; up from 74% in 2019 and 64% in 2018.

The report also found that, for the first time, responsible investment approaches were influencing strategic asset allocation for the majority of super funds (55%, up from 39% in 2019).

This meant that responsible investment practices were considered when allocating capital between asset classes, meeting financial return targets, and reflecting risk tolerances and time horizons.

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