Responsibly invested super funds outperform peers

Australian super funds which have incorporated responsible investment have seen better results than their peers since responsible investment is no longer at the perimeter of the investment philosophy, the Responsible Investment Association of Australasia (RIAA) has found.

The study, which looked at 57 largest superannuation funds and accounted for $1.75 trillion in assets under management (AUM), found that responsibly invested super funds have managed to outperform their peers over one, three and five-year time frames.

At the same time, RIAA compared the MySuper performance of those super funds which employed responsible investment strategies with the MySuper options of those super funds that are not and discovered that the MySuper option of responsible investment super funds outperform the MySuper option of non-RI super funds over five, three and one-year period.

“This year’s report shows that Australia’s largest superannuation funds – including industry, retail, corporate and public sector funds – are ramping up their engagement in responsible investing to drive superior financial performance, reduce risk, and deliver better outcomes for their members and beneficiaries,” Simon O’Connor, RIAA’s chief executive, said.

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The study revealed that 81% of Australia’s largest super funds remained committed to responsible investment (up from 70% in 2016), and 72% reported annually on responsible investment activity (up from 44% in 2016), highlighting how responsible investing is increasingly being embedded within Australian investment markets.

The report also identified 13 Australian super funds identified as leaders for articulating and demonstrating a comprehensive approach to responsible investment – Australian Ethical, AustralianSuper, CareSuper, Cbus, Christian Super, First State Super, Future Fund, Future Super, HESTA, Local Government Super, Unisuper, VicSuper and Vision Super – along with NZ Super Fund.

Further key findings included:

• 81% of super funds have some form of responsible investment commitment in place;
• 61% of super funds have a least one negative screen across the whole fund, up from 34% in 2016;
• The most popular fund-wide exclusions are tobacco and armaments, followed by fossil fuels;
• More than half of super funds offer a total of 88 responsible investment options (compared to 24 funds offering 54 options in 2016). Retail funds offer the largest variety of RI options per fund; and 
• Responsible investment employee numbers have doubled since 2018 and quadrupled since 2016 The Sustainable Development Goals are being integrated by a range of funds into their responsible investment strategies.