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Shifting your company’s default employee retirement fund (known as a superannuation fund in Australia, a pension fund in the UK/Europe, and a 401(k) in the United States) to a fossil fuel-free option can be one of the highest-impact, lowest-effort climate actions available. But even with the facts and performance data on your side, you’ll likely encounter some pushback; especially if you’re trying to shift a legacy provider or challenge long-held assumptions about risk, returns, or company values.
That’s where this resource comes in. Below, you’ll find a set of common objections and suggested responses you can use in conversations with colleagues, HR, or senior leaders. For a deeper dive into the broader strategy, check out our Superannuation Playbook (Australia) or, if you're based in the US, our 401(k) Fossil Free Playbook (USA). These playbooks are designed to help employees understand the mechanics, opportunities, and leverage points for shifting workplace retirement funds toward climate-safe investments.
Q: Aren't these funds about our employees’ retirement and not our company’s personal values? We have an obligation to provide a retirement fund with the highest possible returns to our employees.
A: You’re right: The purpose of retirement funds are to fund employees in retirement. Which is why the 2018 Productivity Commission report was so important: it revealed that 5 million MySuper (default) superannuation accounts are currently held in underperforming products in Australia. The report assessed that if a worker is placed in a bottom-quartile MySuper fund, they will retire with AUD$502,000 less than if they had been placed in a top-quartile one.
As for ethical fund performance, the latest data shows they’re not just holding their own; they’re often ahead. The 2024 RIAA Benchmark Australia Report found that RIAA-certified responsible investment products outperformed their market peers over the medium and long term, delivering a 10-year average return of 13.20% compared to 9.19% for the broader market in Australian share funds. Managed growth and overseas equity funds showed similar strong performance.
While past performance isn’t a guarantee of future results, there’s no credible case to suggest that fossil fuel-free or ESG-aligned funds underperform. Quite the opposite; they’re becoming a benchmark for financial prudence and values alignment.
Of course, going with the default fund isn’t mandatory. Employees can always choose their own. But when our default is both high-performing and aligned with our company’s values, that’s a strong, responsible default to offer.
(reprinted from RIAA 2024 Benchmark Report)
Q: Can’t we just let employees decide to change to a fossil fuel-free retirement fund on their own?
A: Employees will continue to be free to choose whichever fund they want. But for the 40% of employees who aren’t making any conscious decisions about their retirement fund, it’s an important and positive action for an employer to proactively research and update the default fund to one that can both maximise fund performance and invest in a safe climate. Moreover, extending this as a new option to existing employees demonstrates you have an active concern for all staff’s financial future and wellbeing. Offering a fossil fuel-free retirement fund to both new and existing employees has the potential to maximise the organisation's positive impact.
And remember, for both new hires going with our default fund and existing employees changing their current fund, it remains optional.
Q: We have more important priorities on our plate right now. The default retirement fund for our employees isn’t top of the list.
A: Default retirement funds may not seem urgent and pressing - but the issues directly connected to it are. Apart from default retirement accounts contributing billions to increasingly risky fossil-fuel investments, your own business could already be impacted:
- Increasingly, customers and businesses are choosing only to buy from/work with other businesses that are actively working to reduce their climate impact.
- Many high quality candidates look for things like this when choosing jobs. The values of an organisation directly affect staff satisfaction (and that means walking the walk).
- Plus, it’s actually a relatively simple process to change! The staff member who presented this idea to you has access to all kinds of resources to make it even easier.
Q: Doesn’t it create unnecessary risks for our employee investors if we switch our default retirement fund?
A: There are risks and opportunities with all retirement funds, and unfortunately, no fund’s performance is guaranteed. What is guaranteed is that investing in fossil fuels buoys an industry that directly produces dangerous levels of carbon emissions that, as the science shows us, are driving dangerous changes to our climate. Ample evidence exists to demonstrate the severity of this risk. Additionally, we recommend changing to a fossil fuel-free fund which would equally meet our expectations with regard to performance and competitive benefits.
Q: Our existing fund has a green option. Why don’t we just offer that?
A: We want the default fund to be fossil-free. While many funds offer an option that employees can switch to from the default, our goal here is to change the default so it aligns with our values, rather than require our employees to switch. If we can’t provide a fossil free default, then we could broadcast to employees to remind them about the option.
A: (Alternate answer) We have researched that <existing fund provider’s> green option – and unfortunately it looks greener than it is. Though it offers some ethical advantages over other products within <existing fund provider’s> offering, it does not have RIAA certification and it either directly or indirectly invests in fossil fuels.
Q: How do we know that these ‘fossil fuel-free’ funds aren’t ‘greenwashing’? OR Is there any independent certification that proves the proposed new fund really is fossil fuel free?
A: The main certification to start with is RIAA - https://responsibleinvestment.org/ri-certification/
Beyond that, you’ll want to ask vendors specifically what commitments they are making in their funds to screen out fossil fuels. Is there a stated commitment that the fund you are choosing will never have any investments in fossil fuels? Are they disclosing their full holdings?
Q: Don’t green funds have higher risks and lower rate of returns?
A: This is a common, errant assumption – which has been disproved by research. While no retirement fund, regardless of its investments, can promise that past returns guarantee future returns, the RIAA 2024 Benchmark Report shows that ethical investments have performed better than the average retirement fund.
Generally, the higher the expected return for an investment, the higher the investment risk.
Q: We don’t want to make a political statement: Many of our employees and customers are not supportive of action on climate. Why rock the boat?
A: Responsible investment is no longer seen as radical or niche - it’s fast becoming the norm. According to the 2024 RIAA Benchmark Report, responsible investment now accounts for 41% of all professionally managed assets in Australia, up from 36% just a year prior.
That’s a big shift. It’s not about pushing a political agenda, it’s about moving in step with market expectations, regulatory trends, and long-term financial logic. Aligning our retirement fund with responsible investing isn’t about rocking the boat. It’s about securing our employees’ futures, both financially and environmentally.
Q: Isn’t changing our default retirement fund just a bit of tokenism? It’s not going to stop climate change.
A: Retirement funds aren't small potatoes. Australia’s managed fund market hit $3.9 trillion in 2023, with over $1.6 trillion now classified as responsibly invested.
This is structural. Shifting capital, even just our default fund, sends a powerful signal. It aligns us with a growing global movement to divert capital from fossil fuel-heavy investments into funds that prioritise long-term sustainability and resilience. It's not a symbolic tweak; it's participation in a financial shift with real-world consequences.
Q: Changing our default retirement would be an administrative nightmare, wouldn’t it?
A: The process of switching is pretty straightforward. In fact, a lot of the admin work will be completed by the new fund itself. Here’s how it works:
- Payroll sets up a clearing house for the new fund provider (new fund will assist)
- Payroll allocates funds to that new fund
- The new fund will send information to each member employee
Q: Our current default fund provider offers us a lot more than just a retirement fund. They give staff free presentations about increasing retirement investments and salary sacrificing etc. We have invested in a strong relationship with them – why would we change?
A: Most retirement funds offer a range of added benefits such as free financial education presentations to their members, and it’s in the fund’s interests to build a strong relationship with their clients. A fossil fuel free super fund wouldn’t be any different in this respect, but you can confirm with the retirement fund provider to make sure they can provide what your organisation needs.
Q: Is this the only climate change activity you propose? We’ve already made a lot of changes to our organisation like eliminating plastic cups, buying green energy and reducing electricity consumption and reducing paper waste.
A: It’s great we’ve done these things and they’ve not only been great for staff morale and respect for the company as well as for our customer relationships, but they’ve also had positive financial impacts. Changing our default retirement fund could take all these positive impacts a lot further; it might seem too small an action to have any real or immediate impact, but it would make us part of a movement that has global ripple effects (to the financial tune of $US11trillion ( $A16 trillion) moved out of fossil fuel industries, as of September 2019). And a growing number of businesses are making their climate commitments central to their brand – for good reason.
Q. Our company cannot change its retirement to any of the fossil-fuel free default options. Can we do anything else?
A: Absolutely. As a last resort, if you’ve hit a roadblock that is truly insurmountable, you can always run a program to make employees aware of the other options that are out there. You can provide the information because employees have asked for alternatives, and that while you cannot change the default the way you would like to, you can encourage employees to switch if that fits their ethical stance.
Final thoughts
Switching to a default fossil free retirement fund in your organisation isn’t just a finance tweak. It’s a signal about what kind of organisation you are, and what kind of future you want to help create. Retirement funds are among the most powerful, overlooked tools we have for climate impact. If you're ready to take the next step, our Superannuation Playbook (Australia) or, if you're based in the US, our 401(k) Fossil Free Playbook (USA), are designed to help you lead the way - no matter your role or level of seniority.
