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Industry super funds neglecting ethical issues
When it comes to environmental, social and governance (ESG) issues, industry super funds tend to focus on the 'G' rather than the 'E' and 'S', according to Australian Ethical general manager, strategy and communications, Paul Smith.
While some industry superannuation fund trustees have expressed a desire to focus on environmental and social issues, governance is the "low-hanging fruit" that receives the most attention, Smith said.
"It's a different philosophy [to Australian Ethical's approach] - industry super funds want to invest in BHP, but they want to work from within the system to make BHP more sustainable," he said.
Australian Ethical, on the other hand, is moving away from fossil fuels and mining, Smith said.
"We're screening out sectors - we're not screening out certain stocks. Some of our competitors in the funds management space, like BT and Perpetual in their sustainability funds, use a 'best of sector' approach," Smith said.
Despite Australian Ethical's strict screening process (which includes both positive and negative screening) its funds still manage to outperform with strong returns.
Smith pointed to the Australian Ethical Smaller Companies Trust, which recently received a 'recommended' rating from ratings house Lonsec, as evidence.
"Over a three-year period to 31 July 2011, the Smaller Companies Trust outperformed the S&P/ASX Small Industrials index by 5.2 per cent (after fees), also outperforming the Lonsec Responsible Investment peer group average by 3.0 per cent," said Smith.
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