Australians are wising up to the power their superannuation funds can have when it comes to making a positive difference in the world, and ethical super funds are making it easier than ever to switch, writes Nina Hendy.
With $3.3 trillion of superannuation assets under management in Australia – the third largest pool of pension assets in the world – individuals can help funnel that massive bucket of cash into ethical investments by making a simple choice over which super fund they join.
Think about it. The average 35-year-old will have around $100,000 saved. That’s a decent amount of financial influence individually, but the collective sway that Australians could have on how their money is utilised is eye-watering.
Should you switch to ethical super?
Switching to an ethical fund is catching on.
The superannuation system is for responsible investments inAustralia, soaring to $1.2 trillion in 2020 – up from $983 billion in 2019, according to the Responsible Investment Association Australasia (RIAA).
Meanwhile, the bucket of money being responsibly invested grew from 31 per cent to 40 percent in 2019. It’s the ultimate proof that Aussies are increasingly keen to vote with their wallets when it comes to climate change.
Future Super CEO and founder Simon Sheikh says ethical super funds have been on the rise in the last few years, as young Australians in particular push for change.
An ethical superannuation fund can pull your money out of industries that pollute and channel it into projects that build a more equitable and climate-conscious world.
According to Sheikh, last year was the turning point for climate action in Australia, with bushfires and flash flooding resonating with young investors. “2020 was the year that we saw when things turned bad, people took action,” Sheikh says. Future Super’s membership grew by over 100 per cent in 2020 alone.
"The concept of putting your retirement savings into something that makes the planet better when there’s government inaction on climate shows individual action through the power of superannuation.”
Active Super’s head of responsible investment, Moya Yip only expects responsible investment to grow in the coming years. “Members are seeking a super fund that invests in line with their personal values, which might mean switching to a fund that invests responsibly,” Yip says.
The impact of ethical super
Your employer puts an extra 10 per cent on top of your take-home wage into your nominated super fund. You may be topping up that super with your own contributions, too.
Super funds and banks decide how to invest your super to grow your nest egg on your behalf, so that you have more in retirement. An ethical superannuation fund can pull your money out of industries that pollute and channel it into projects that build a more equitable and climate-conscious. Future Super estimates that investing with them abates some 5.89 tonnes of carbon from the atmosphere (vs. 2.4 tonnes for going car-free, and 0.8 tonnes for going vegan).
As Ethical Super explains, an ethical investment manager will actively screen out companies that engage in poor practices and look to invest in companies that do good for people and the planet.
What to consider when switching super
There are about 500 super funds in Australia, with a lot of specific niche funds out there (but still only a handful of truly fossil fuel-free funds). Cruelty Free Super, for example, stands for investments that don’t harm animals. Australian Ethical invests to bring about social change. And Verve Super is an ethical super fund for women, by women.
Future Super estimates that switching to their super fund takes a little under 20 minutes – a small price to pay for a sizeable positive impact on our environment.
Make sure you know how your fund invests your super (most ethical super funds disclose their investments on their website. If you can’t find them, ask), and get a clear picture of the funds that you’ll pay. Also, bear in mind that switching could impact your insurance benefits, so make sure you check before switching. And of course, if you have any questions, seek independent financial advice first.
How to switch to ethical super
Switching funds that better align with your personal beliefs about the world around you is easy. Future Super, for example, estimates that switching to their super fund takes a little under 20 minutes – a small price to pay for a sizeable positive impact on our environment.
You can choose to roll over your super to consolidate your nest egg in one fund, meaning you can keep track of growth and reduce fees and charges. You don’t pay tax on the amount rolled over to another provider until you choose to withdraw your super.
The steps are:
· Compare your options and select a fund
· Join your new super fund by completing the online membership form
· Move your super across – you can request your fund to do this on your behalf
· Update your super fund information with your employer.
· You can find the form you need here.
Beware of greenwashing
Bear in mind that there’s some greenwashing going on, and not enough transparency to always know where your investments end up, Sheikh says.
Consumers should ask their super fund how much money across their portfolio is invested in fossil fuels verses renewable energy. “Make sure your fund discloses its investments,” he explains. “Many super funds are investing in harmful industries like fossil fuels and members don’t know that.If your super fund has a plan to cut fossil fuels by 2050 – question them why not earlier. Individuals have a huge amount of power in their super and can use it to push for change.”
Want to learn more about switching your super for maximum climate impact? Check out WorkForClimate's Money Impact Area resources for everything you need to know.
Image credit: Unsplash