Research by Rainmaker Information has analysed the portfolio holdings of MySuper and ESG investment options, finding ESG products overweight in CSL, Telstra, and ResMed in Australia.
These funds displayed lower exposure to materials, energy, and financial sectors, while exhibiting higher exposure to communications services, healthcare, and information technology sectors.
The Rainmaker study of super fund portfolio holdings as of 30 June 2022 looked at 69 MySuper products with a sample of 38 specialist ESG investment options offered through workplace super funds.
“Contrary to common perception, the findings highlighted that an ESG investment strategy involves more than simply avoiding certain investments,” said Alex Dunnin, executive director of research at Rainmaker Information.
The analysis found the top 10 holdings accounted for almost half (42 per cent) of MySuper Australian equities.
The top 50 holdings represented 75 per cent and the top 100 holdings accounted for 89 per cent.
As company size decreased, a more active company allocation approach was indicated, with super funds exhibiting greater variations from the ASX index weighting.
ESG products showed reduced exposure to companies such as BHP, Woodside Energy, and Transurban although average exposures were similar for MySuper and ESG investment options.
Interestingly, international equities holdings displayed higher diversity and less concentration than their Australian counterparts, as the top 50 holdings accounted for just 30 per cent of international equities portfolios.
With the exception of Tesla, Microsoft, and Alibaba, ESG products exhibited clear tilts away from major global technology giants.
Other asset allocations
Rainmaker Information’s analysis also explored fixed income holdings, which were predominantly held through mandates. In this, retail funds exhibited a higher proportion of direct holdings compared to not-for-profit funds.
IFM Investors came out on top as the largest fixed income manager and private debt emerged as the largest direct holding.
Dunnin said: “Super funds reported that three-quarters of their unlisted infrastructure and unlisted property investments were held externally through investment mandates.
“Conversely, investments in unlisted equity and alternatives were predominantly placed through investment manager mandates.”
