Presented in partnership with Verve Super
After watching the devastation wrought by Australia’s worst-ever bushfires, would you feel happy investing your money in a company that harms the environment? Probably not, but your superannuation fund could be doing just that.
“Many of us don’t know where our superannuation is invested,” says Christina Hobbs, the CEO of Verve Super, which is Australia’s first ethical super fund tailored to women. “But some big superannuation funds hold shares in everything from fossil fuels companies – including coal, oil and gas – to weapons manufacturers.”
If that seems shocking to you, you’re not alone. Many of us know very little about where our superannuation is being invested – or have ever stopped to consider that the investments made in our names, by our super fund, could be doing damage. But, says Hobbs, since the bushfires, many Australians are re-evaluating whether their super funds are investing in companies that contribute to the climate change crisis.
First, though, a quick primer. When you pay into your super, the fund uses your money to invest in shares and other assets, paying you a return on the investment. In the next 20 years, these funds will own nearly two-thirds of the Australian stockmarket, giving them enormous power to shape the direction of the economy.
I describe it as aligning your money to your values
Most superannuation funds don’t pay any attention to the ethics of companies they invest in, says Hobbs, whereas Verve Super invests in those that make a positive social or environmental impact.
“Broadly speaking, I describe it as aligning your money to your values. The industries we tend to screen out are those that are losing their social licence to operate. And so we don’t invest in tobacco, gambling, fossil fuels, companies that test beautyproducts on animals, unethical fashion. These are all industries that, if you think about the long-term outlook, will not be a good investment in the future.”
Hobbs, a former economist who spent a decade working with the United Nations, believes that the only way to solve the climate crisis is “to take the trillions of dollars tied up in the fossil fuel industry and reinvest it in companies that are building a brighter future for the planet”.
Crucially, she explains that ethical investing doesn’t mean sacrificing profits. “In fact, ethical funds are outperforming the market,” says Hobbs, pointing to industries such as healthcare, renewable energy and sustainable transport, which have a positive social impact and offer a promising financial future.
“People want to do what’s right for the planet but they also want to ensure that their retirement savings will grow. We’re saying you can have both”.
Here’s how to get started with ethical investing:
1. Work out what ethical means to you
Everyone has a different understanding of what it means to be ‘ethical’. So, it’s up to you to think about your priorities. Is the environment important for you? Or do you want to avoid investing in gambling companies, or weapons?
2. Do your research
You can ask your fund which companies they invest in, says Hobbs – and be wary if they aren’t keen to tell you. “We have a linkon our site that takes you to a list of all the companies we invest in. Good ethical funds should have that.” You can also check out Market Forcesto see if your bank or super fund is invested in fossil fuel companies.
3. Consider fees vs returns
Super funds charge an annual fee for investing your money. “It’s tempting to choose the fund with the lowest fee, but we encourage people to look at the return,” says Hobbs. “You should look at what kind of return a super fund is trying to achieve and then look at the past returns and performance history on their website. Some superfunds offer additional services to their members, like financial coaching, so consider these as well.
To find out more about investing your super ethically visit Verve Super.
Verve Super is offering all Primer readers a free session with a Super Specialist to learn how to get your super sorted. Book now.
Disclaimer: Information provided is of a general nature only, your personal financial objectives, situation or needs have not been taken into account. If you are interested in receiving personal financial advice, please see a financial advisor.