The MySuper products of super funds demonstrating leading responsible investment practice outperformed those of non-leaders on average in 2022, according to a new study released by the Responsible Investment Association Australasia (RIAA).
The Responsible Investment Super Study 2023, supported by PIMCO, has named 10 Responsible Super Fund Leaders* out of the 53 assessed for the study. These funds commit to good governance and accountability; implement and measure responsible investment approaches through activities such as engagement and voting and ESG integration; regularly measure outcomes; and exhibit a high degree of transparency.
Dr. Zsuzsa Banhalmi-Zakar, Research Manager at RIAA said, “Aussies that are choosing to align their super with their values are not losing out on returns, demonstrating that strong financial performance and investing ethically are not mutually exclusive.”
The study also shows that legislation has reshaped the sector recently. The most significant change being the introduction of mandatory requirement for funds to disclose the assets they invest in (which came into effect in March 2022). As a result, 100% of super funds that were assessed for the study now disclose portfolio holdings, as opposed to 2021 when 62% published only their top 20 holdings or less.
“Australians are now better equipped to determine which companies and funds their super invests in and decide for themselves if it measures up to their values. Transparency of super fund portfolios is essential to monitoring potential greenwashing, although the current legislation does not include all underlying holdings,” said Banhalmi-Zakar.
“There is of course room to improve transparency practices elsewhere. For instance, only 30% of super funds publish voting records and even fewer publish their voting intentions before voting.”
Additionally, the Your Future, Your Super (YFYS) regime has driven consolidation within the industry, fostering fewer, yet larger super funds which was likely prompted by the identification and eventual closing of underperforming funds. As a result, APRA-regulated entities amounted to 76 super funds or trustees in 2022, compared to 167 in 2020.
“The result of this shift is a leaner, more resilient landscape that positions super funds to navigate challenges,” said Banhalmi-Zakar.
“RIAA is still concerned that the way the YFYS performance test is currently structured will disincentivise long-term sustainable investment approaches such as funds shifting their investments towards net zero commitments and reduced emissions. We continue to engage constructively with Treasury on a solution.“
The report also shows that climate considerations have taken centre stage, with 42% of super funds now having portfolio targets aligned with the Paris Agreement (net zero by 2050), compared with just 34% in 2021.
Super fund products of Leaders and those certified by RIAA as quality, true to label responsible investments have shown impressive contribution to lowering carbon emissions. RIAA certified funds have a 79% lower weighted average carbon intensity than non-certified super funds when counting scope 1, 2 and 3 emissions. For Responsible Super Fund Leaders’ products, it’s a 60% reduction compared to nonleaders.
“It is crucial for investors to be cognisant of the risks and opportunities created by the transition to a lower carbon economy, so we are encouraged that more and more Australian super funds are applying a range of climate metrics across their portfolios. This can enable better preparation for any market repricing associated with the low carbon transition,” said Grover Burthey, Head of ESG Portfolio Management at PIMCO.
Major strides were made in gender equity since 2021, with more large super funds reporting gender balanced boards. However, 38% of boards still fall short of the 40% women representation target.
“Our super industry still has a long way to go to meet the gender equity levels that super funds themselves are demanding of the companies they invest in. 58% of the 469 trustees are men and 42% are women, which represents less than a 2% increase in the number of women trustees since 2021,” said Banhalmi-Zakar.
The study also finds super funds are deepening their commitments to responsible investment and capabilities in ESG issues.
“The number of super funds that employ staff dedicated to managing ESG risks and opportunities almost doubled since the last reporting period, from 36% to 62%. This upskilling should ensure not only a continued focus on ESG in the sector, but more sophisticated approaches to responsible investment that have real outcomes.”
The Responsible Investment Super Study series is published every two years and is the most comprehensive research conducted on the responsible investment and ESG practices of Australia's superannuation sector.
*The Responsible Super Fund Leaders for 2023 are Australian Ethical Super, AustralianSuper, Aware Super, CareSuper, Cbus Super, HESTA, Future Super, Rest, Telstra Super and UniSuper.
For further information, please contact:
Ada Tso,
Marketing & Communications Manager, RIAA
ada@responsibleinvestment.org
+61481308718
Katie Braid,
Communications & Media Coordinator,
RIAA katie@responsibleinvestment.org
About the contributors
About the speakers
The MySuper products of super funds demonstrating leading responsible investment practice outperformed those of non-leaders on average in 2022, according to a new study released by the Responsible Investment Association Australasia (RIAA).
The Responsible Investment Super Study 2023, supported by PIMCO, has named 10 Responsible Super Fund Leaders* out of the 53 assessed for the study. These funds commit to good governance and accountability; implement and measure responsible investment approaches through activities such as engagement and voting and ESG integration; regularly measure outcomes; and exhibit a high degree of transparency.
Dr. Zsuzsa Banhalmi-Zakar, Research Manager at RIAA said, “Aussies that are choosing to align their super with their values are not losing out on returns, demonstrating that strong financial performance and investing ethically are not mutually exclusive.”
The study also shows that legislation has reshaped the sector recently. The most significant change being the introduction of mandatory requirement for funds to disclose the assets they invest in (which came into effect in March 2022). As a result, 100% of super funds that were assessed for the study now disclose portfolio holdings, as opposed to 2021 when 62% published only their top 20 holdings or less.
“Australians are now better equipped to determine which companies and funds their super invests in and decide for themselves if it measures up to their values. Transparency of super fund portfolios is essential to monitoring potential greenwashing, although the current legislation does not include all underlying holdings,” said Banhalmi-Zakar.
“There is of course room to improve transparency practices elsewhere. For instance, only 30% of super funds publish voting records and even fewer publish their voting intentions before voting.”
Additionally, the Your Future, Your Super (YFYS) regime has driven consolidation within the industry, fostering fewer, yet larger super funds which was likely prompted by the identification and eventual closing of underperforming funds. As a result, APRA-regulated entities amounted to 76 super funds or trustees in 2022, compared to 167 in 2020.
“The result of this shift is a leaner, more resilient landscape that positions super funds to navigate challenges,” said Banhalmi-Zakar.
“RIAA is still concerned that the way the YFYS performance test is currently structured will disincentivise long-term sustainable investment approaches such as funds shifting their investments towards net zero commitments and reduced emissions. We continue to engage constructively with Treasury on a solution.“
The report also shows that climate considerations have taken centre stage, with 42% of super funds now having portfolio targets aligned with the Paris Agreement (net zero by 2050), compared with just 34% in 2021.
Super fund products of Leaders and those certified by RIAA as quality, true to label responsible investments have shown impressive contribution to lowering carbon emissions. RIAA certified funds have a 79% lower weighted average carbon intensity than non-certified super funds when counting scope 1, 2 and 3 emissions. For Responsible Super Fund Leaders’ products, it’s a 60% reduction compared to nonleaders.
“It is crucial for investors to be cognisant of the risks and opportunities created by the transition to a lower carbon economy, so we are encouraged that more and more Australian super funds are applying a range of climate metrics across their portfolios. This can enable better preparation for any market repricing associated with the low carbon transition,” said Grover Burthey, Head of ESG Portfolio Management at PIMCO.
Major strides were made in gender equity since 2021, with more large super funds reporting gender balanced boards. However, 38% of boards still fall short of the 40% women representation target.
“Our super industry still has a long way to go to meet the gender equity levels that super funds themselves are demanding of the companies they invest in. 58% of the 469 trustees are men and 42% are women, which represents less than a 2% increase in the number of women trustees since 2021,” said Banhalmi-Zakar.
The study also finds super funds are deepening their commitments to responsible investment and capabilities in ESG issues.
“The number of super funds that employ staff dedicated to managing ESG risks and opportunities almost doubled since the last reporting period, from 36% to 62%. This upskilling should ensure not only a continued focus on ESG in the sector, but more sophisticated approaches to responsible investment that have real outcomes.”
The Responsible Investment Super Study series is published every two years and is the most comprehensive research conducted on the responsible investment and ESG practices of Australia's superannuation sector.
*The Responsible Super Fund Leaders for 2023 are Australian Ethical Super, AustralianSuper, Aware Super, CareSuper, Cbus Super, HESTA, Future Super, Rest, Telstra Super and UniSuper.
For further information, please contact:
Ada Tso,
Marketing & Communications Manager, RIAA
ada@responsibleinvestment.org
+61481308718
Katie Braid,
Communications & Media Coordinator,
RIAA katie@responsibleinvestment.org
