Up to $450 billion of Australians’ retirement savings could be invested in industries members want their super funds to avoid, according to new research that has reignited debate around transparency and ethical investing in the superannuation sector.
A report from Mindful Investing found $89 billion invested in companies linked to fossil fuels, human rights violations, environmental harm, weapons, social harm and animal cruelty across 31 MySuper and sustainable investment options reviewed.
The analysis covered $882 billion in funds under management from 15 major super fund providers, representing around 29 per cent of the superannuation industry.
The report argues that, when extrapolated across the broader superannuation system, total exposure to these sectors could reach $450 billion.
The findings come as new consumer research commissioned by Mindful Investing found Australians overwhelmingly expect their retirement savings to be invested responsibly.
According to the survey, 84 per cent of Australians expect their superannuation to be managed ethically, while 87 per cent want their super funds to avoid investments linked to human rights violations.
A further 85 per cent want to avoid environmental damage and 69 per cent want to avoid fossil fuels.
More than seven in 10 Australians, or 71 per cent, said they would switch funds or investment options if they discovered their super was invested in sectors they wanted to avoid.
Mindful Investing chief executive Barry Coates said the research revealed a significant disconnect between member expectations and portfolio holdings.
“Australians will be shocked to discover their retirement savings are contributing to harm in the world, from funding weapons being used in wars to supporting companies that violate human rights and destroy our environment,” Coates said.
Fossil fuels represented the largest area of exposure identified in the report, accounting for $45.8 billion of investments across the options analysed.
Human rights violations accounted for a further $21.1 billion, while environmental harm represented $18.8 billion. Investments linked to social harm totalled $11 billion, with animal cruelty and weapons exposures amounting to $10.7 billion and $7 billion respectively.
The report found MySuper options had an average exposure of 9.91 per cent to one or more issues of concern, compared with 4.98 per cent across sustainable and socially conscious investment options.
While ethical options generally recorded lower exposures than their MySuper counterparts, Mindful Investing said some products marketed as ethical, sustainable or socially responsible continued to hold meaningful investments in sectors many Australians said they wanted excluded.
The research also highlighted wide differences between funds. Exposure within MySuper products ranged from less than 1 per cent of portfolio value to more than 13 per cent.
Mindful Investing said limited portfolio disclosure remains a key obstacle for members seeking to understand where their retirement savings are invested.
The analysis was only able to assess around two-thirds of portfolio holdings because of insufficient public disclosure, despite super funds being required to publish portfolio holdings information every six months.
Coates said greater transparency was needed to help members make informed decisions.
“Most super funds aren’t providing the transparency Australians need to make informed decisions about where their retirement money is invested,” he said.
“We’ve created a free, interactive tool to make it easier for Australians to find out where their money is invested and empower them to make an informed choice.”
