There is a clear lack of Principles of Responsible Investment (PRI) signatories when it comes to retail superannuation funds, compared to not-for-profit funds, according to a report.
The PRI’s latest research on Australia found that out of the largest retail super funds, only 58% were PRI signatories.
This was compared to the largest not-for-profit funds (industry, public sector, and corporate) where 75% were signatories.
“The PRI is strongly represented among not-for-profit super funds, particularly in the industry sector, which is the fastest growing segment of the superannuation system. The majority of not-for-profit funds follow an equal representation trustee model, whereby both employees and employers are represented at board level,” the report said.
“The culture of not-for-profit funds means that they have traditionally been interested in social and governance issues. This has made them more responsive to broader sustainability issues than both for-profit super funds and workplace pension providers in other countries.”
The report pointed to the Responsible Investments Association of Australia’s findings that 72% of funds had integrated environmental, social, and governance (ESG) factors into their financial analysis and 60% undertook active ownership (although they dd not necessarily disclose their engagement activity).
“Fifty-one percent of funds employed one or more full-time responsible investment-focused employee, and most looked to their asset consultants or external managers to provide some expertise on ESG issues,” it said.
“Although retail super funds were previously slower than not-for-profit funds in developing responsible investment policies, the RIAA found that there was now little difference between the retail and industry sectors.
“In keeping with the nature of their respective sectors, industry super funds tended to have fewer responsible investment options but were more likely to integrate ESG issues across their investment process, while retail funds offered more ESG options but were less likely to apply a fund-wide responsible investment integration approach.”