Australian superannuation funds are failing to provide enough high-quality ethical and sustainability investment options, instead being susceptible to greenwashing, according to new survey of financial advisers.
The study was launched on a new ratings site by the Ethical Advisers Co-operative on Wednesday with the group’s members comparing a collection of commonly used ethical investment funds.
Many funds branded as ethical were found to fall short of what is being demanded by the ‘average ethical investor’, with some including AMP and Russell, receiving ‘poor’ ratings.
While many funds have introduced a range of ethical and sustainable investment products in recent years, the Co-op believes a lack of enforceable standards around disclosure means some funds can claim to be ethical without substantial proof.
There are currently no requirements for funds to disclose to members the underlying companies in which their money is invested.
Advisers in the Co-Op rated funds through comparisons to the expectations of their ‘average ethical investor’ using two key indicators: the fund’s portfolio of investments and its track record of voting on climate and human rights issues at shareholder meetings.
Where a fund holds companies considered largely unacceptable by the average ethical client, or where it has consistently voted against engagement on environmental or social issues, ethical advisers tended to penalise the fund in their rating.
“This is not about naming or shaming, it is simply a means of encouraging greater transparency, so that investors are able to make well-informed choices,” Terry Pinnell, chair, Ethical Advisers Co-op said.
“This is why we have developed the green-leaf ethical ratings system. It helps investors evaluate and compare the different approaches to ethical and sustainable selection that are being applied within different investments.”
The Ethical Advisers’ Co-Op represents 3,300 clients with more than $1.5 billion invested in funds collectively.
“With over $2.6 trillion of retirement capital invested in superannuation, our super funds are Australia’s most significant shareholders and have the potential to shape the society in which we live,” Mr Pinnell said.
“Where they invest their members’ funds, and how they act, as large shareholders of our corporations, can be either negative – in supporting unsustainable industries, or positive – in supporting companies that provide solutions to the world’s problems.”
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