Do super funds get wrapped up in the ‘feel-good ESG blanket’?

There could be political resistance to ESG if super fund members feel they are given a lack of choice when it comes to their investments, according to this political science professor.

Speaking at the Responsible Investment Association of Australasia (RIAA) conference, Professor Timothy Lynch of the University of Melbourne, highlighted potential disenfranchisement of the average worker upon hearing of emission targets and the energy transition.

“The disenfranchisement comes when they have no [political] party that represents an alternative position because we have this big soft consensus,” he observed.

“The US, I think I would defend on the basis that it does offer a political alternative. You can vote one way or another. It does have huge political consequences in terms of polarisation, but there is a choice that Australians do not have anymore.”

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He pointed to superannuation funds in a compulsory system, which subjected members to measures that were not open to public voting.

“[Measures] are decided in conferences like this, and in private suites and hotels, so it has been de-democratised as an activity. My caution would be that you need to be mindful of this,” he observed.

“The more you wrap yourself in the feel-good blanket of ESG, the more likely you are to encounter political resistance.”

In response, Fiona Reynolds, an independent director, questioned the role of corporate lobbyists towards politicising the issue of ESG. 

“If, as investors, we do not tackle the issue of corporate lobbying within our engagement and our stewardship, and what associations people are involved in and what they lobby against, then this issue will continue to happen,” she stated.

To this, fellow panellist Jens Peers, Mirova’s chief investment officer, added that the biggest backlash to ESG was being seen in countries and states with individuals who “had the most to lose”.   

“Looking at the big transition and change, as an investor, it is our fiduciary duty that we do that by making sure that the companies we invest in are ready for the future,” he agreed.