SUPER savers appear more engaged with ethical investments than their own retirement savings, opening the door for a bigger focus on superannuation as the growth of ethical funds accelerates.
A new study has found that four out of five people would consider switching super or other investments if their current fund didn’t match their ethical values, while more than half will consider making ethical or responsible investments in the next five years.
The Lonergan Research study for the Responsible Investment Association Australia found Millennials were most likely to consider investing in ethical companies or super funds.
This engagement is good news, as super industry leaders say younger Australians usually leave retirement savings at the back of their minds, even though acting early can multiply their life savings many times over decades down the track.
RIAA CEO Simon O’Connor said Australians currently had almost $55 billion in ethical investment funds, about 4.5 per cent of all professionally-managed investments.
The number of funds and investment options is growing strongly, and RIAA currently certified 160 funds, he said.
Mr O’Connor said the level of ethical investment in Australia had effectively doubled in two years. “It’s really hitting scale now, and we are seeing a snowballing effect,” he said.
“A lot more products are coming to market to service the demand.”
The growing interest was good for super in general, Mr O’Connor said. “We are finding that people investing in ethical investments do tend to be more engaged and talking about issues they care about. It’s a great way to get them more interested in super and retirement savings.”
The research report says the biggest red flags for potential investors are animal cruelty, human rights and pornography. Alcohol, tobacco and harming the environment are other turn-offs, while renewable energy, health products and education are positively viewed.
It also says people find it difficult to find information about ethical funds. Mr O’Connor said they could learn more by:
• Using RIAA’s new webtool responsiblereturns.com.au to see products that matched their values;
• Ask their super funds about ethical investment options;
• Speak with a financial adviser.
Wealth for Life Financial Planning principal Rex Whitford said ethical investments were becoming a new battleground for super funds, but he was not yet sold on them given that many were yet to have a history of long-term returns.
“I’m worried when I see a proliferation of any type of fund,” he said.
Mr Whitford said wind farms and other renewable energy investments benefited from government subsidising so “of course they are going to do well”.
“If it makes people feel warm and fuzzy at night, that’s a good thing.
“But there’s a lot of pressure at the moment for governments to start scrapping renewable energy targets and subsidies.”
By Anthony Keane
25 November 2017