An increasing number of superannuation funds actively incorporate environmental, social and corporate governance (ESG) strategies into their operations, but still only a handful of funds go out on a limb to change their asset allocation, according to research by SuperRatings.
"Only a few funds invest more than five per cent of their total net assets in responsible investments, which shows a reluctance to fully commit to sustainability, even while many funds claim to be sustainable in other ways," the company said.
SuperRatings found that about 26 per cent of respondents said to have already developed and implemented a sustainability policy when making investment decisions, while the number of funds that have reduced their carbon or greenhouse gas emissions has improved by 40 per cent from 2009.
Corporate governance was high on the agenda of super funds with nearly 61 per cent of respondents considering corporate governance to be the most important or major factor when selecting investments.
The SuperRatings survey took place after the federal government scrapped the emissions trading scheme, but before the introduction of a carbon tax was announced.
As a result, the researchers found that super funds had lacked in taking strong measures to implement sustainability policies.
"The leading funds kept on working on this, but the general consensus of the industry was that it (sustainability) was less important than it was; that is really what the research reinforced," SuperRatings chief operating officer Nathan Macphee said.
"[But] we think that the introduction of the carbon price - clearly it is subject to future details - has increased the focus on sustainability within the industry. Things went by for a while, but it is definitely back on the agenda," he said.
Macphee expects that in coming years funds with the most sustainable practices and the lowest carbon emissions will be rewarded by the market, while those that further delay addressing climate change will be punished.
SuperRatings assesses funds' sustainability on three criteria: behaviour, investments and influence.
Although influencing sustainable behaviour of members and services providers will not result in tax benefits, it is an important driver of behavioural change, Macphee said. "Influencing your members leads to stronger outcomes in the future and funds need to make strong inroads across all three areas," he said.
In March, SuperRatings awarded Local Government Super with the Infinity Award 2011 for the fund with the most genuine commitment to addressing ESG issues.
