Default superannuation fund options should be required to put minimum standards of ethical or responsible investment in place, argues the Responsible Investments Association of Australia (RIAA).
The RIAA released a discussion paper titled Driving Long-term Investment and Delivering Responsible Financial Markets at the Responsible Investment Conference in Sydney yesterday.
The paper has two stated objectives: first, to focus capital on delivering long-term value; and second, to shift financial markets towards a more responsible and sustainable footing.
The RIAA paper details nine specific proposals, including improving corporate and investor disclosure; supporting longer-term investment holdings through tax law; and strengthening asset owner competency and capability.
But one proposal that RIAA chief executive Simon O'Connor described as "quite controversial" was the suggestion that default super options be redefined to include responsible investment elements.
The paper proposes that "default investments for members of the public who do not exercise choice should include a base level of moral and [environmental, social and governance] standards consistent with expectations of Australasians".
The RIAA pointed out that "extensive polling" of Australians has indicated that people have a "baseline expectation" that their superannuation is invested without doing any harm.
"This understanding has led to a rapid divestment from around 30 superfunds in the last two years from tobacco, based on an increasingly clear view that the majority of beneficiaries do have some base level expectations as to how they want their retirement savings managed," said the paper.
The RIAA noted that AMP Capital chief executive Stephen Dunne was recently quoted in the Fairfax press suggesting that super fund trustees and asset managers should consider putting in place a baseline moral standard across all investments.
Also speaking at conference in Sydney, SuperRatings head of research Kirby Rappell said a number of super funds are "shifting away from funds having a standalone sustainable option, and actually implementing it across their mainstream portfolios".
"More and more [super funds] might be integrating [responsible investment]. BT Super For Life had a focus on sustainable investments in their core offering. Local Government Super, Christian Super, HESTA – you’re seeing [funds] that do that," Mr Rappell said.
"Seventy per cent of money is in default [options]. Versus maybe one per cent if you’re lucky in a single standalone option. So you can pretty much solve part of the challenge that you’re facing overnight [if you make default options more responsible] – but it does require some movement by organisations."
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