Speaking at the Responsible Investments Association of Australia (RIAA) conference in Sydney yesterday, Mr Sherry – who set up the 2010 'Cooper Review' into the superannuation system during his tenure – said there is a broad shift underway in community attitudes towards responsible investment.
“That's been expressed in a whole range of areas. We see it expressed around trustee behaviour and intervention in environmental issues, and in respect to corporate salaries and pay,” he said.
Superannuation trustees are also exercising their right to vote in investments they own either directly or indirectly, said Mr Sherry.
The Australian Prudential Regulation Authority (APRA) has released a number of directives that go some way towards addressing responsible investment issues, he said – but they don't go far enough.
In particular, Mr Sherry said he was “disappointed” with the final versions of Prudential Standard SPS 530 Investment Governance and Prudential Practice Guide SPS220 Risk Management which were released in July 2013.
"They don't go to some of the issues around responsible investment by specific reference. In some ways they do – such as labour standards, health and safety and natural disasters,” he said.
[But the APRA directives] could have gone significantly further by specifically referring to other responsible investment issues [which are] of particular interest to the broader community,” said Mr Sherry.
He acknowledged that some – and he emphasised the word 'some' – APRA-regulated superannuation funds do take a “very broad, deep and proactive approach to responsible investment”.
A handful of funds also have specific requirements at their investment sub-committee meetings to overlay responsible assessments in considerable detail on all investments, said Mr Sherry.
They also offer quite specific investment options that members can select, he added.
"But the APRA requirements should have been updated to require all – not some, as we have in current practice – to overlay their investment decisions with an appropriate responsible investment set of considerations,” said Mr Sherry.
"It is the appropriate time for all superannuation trustees to be applying a responsible investment overlay to all of their decisions in the investment area,” he said.
The RIAA conference also saw the release of a national online poll of 1,026 Australians aged 18 or older which found that over half (54 per cent) of people would rather invest in a responsible superannuation fund than a fund that only considers maximising returns.
RIAA chief executive Simon O'Connor said the finding demonstrated the “enormous potential for growth in the responsible investment sector”.
"Even more significant is that seven in 10 Australians (69 per cent) think it’s important for super funds to make responsible investments, for example, by investing in companies that build clean energy infrastructure or avoiding investments that harm the community like tobacco,” said Mr O'Connor.
In addition, 82 per cent of those polled said that responsible superannuation funds perform as well as or better than ‘traditional’ super funds, he said.
“This is supported by findings in the Responsible Investment Benchmark Report 2013 showing five-year returns post-GFC have been stronger for responsible investment funds than the benchmark and mainstream funds,” said Mr O’Connor.
