For anyone who struggles to understand super, Future Super’s co-founder Kirstin Hunter has one simple piece of advice: “do not be intimidated.” You have the power to make a statement with your money and where you keep it will shape the world you retire into.
We spoke to Hunter about Future Super’s holistic approach to ethical investing following the release of the fund’s 2019 Impact Report.
Renewables: Our super plays a role
It’s hard to comprehend that money we might not see for decades is worth thinking about now. This and the fact that your employer can nominate a fund for you, really doesn’t leave much incentive to think about your retirement plan before time.
However, did you know that the superannuation industry is worth a whopping three trillion dollars? Just 7.7% of that figure could fund Australia’s transition to 100% renewable energy.
The problem is for many of us, super can often seem so confusing. Hunter says that the industry is almost motivated to make you think that superannuation is complicated and boring, because then you’ll just leave it where it is.
“It’s very powerful when people realise that they do have control of their money and that they can make a strong statement about the world they want to live in with who they choose to manage it,” she says.
Future Super’s holistic approach to ethical investing
Being aware of the future we retire into is important to Future Super, says Hunter.
The company does not invest in stuff like fossil fuels, alcohol, tobacco, gambling, old growth logging, animal cruelty, private prisons and armaments to name a few.
“Instead we look for opportunities to invest members’ money into things that will actually drive a positive impact, so we have a lot of investment in renewable energy, wind farms and solar farms,” says Hunter.
According to Future Super’s Impact Report, the funds’ 15,000-plus members collectively saved more than 62,000 tonnes of CO2 emissions from entering the atmosphere in 2019. That’s the equivalent of taking 27,500 cars off Australia’s roads.
Hunter says that other so-called ‘sustainable’ or ‘ethical’ investors, particularly in the superannuation space, are more inclined to do a best-in-class screen (selection process), rather than a strict negative screen.
“They might say, we’ll invest in the least environmentally destructive fossil fuel company, but they’ll still choose to invest in a fossil fuel company. At Future Super we take a much more hardline approach to what we deem as ethical and therefore what we deem as worthy of our members’ investment,” says Hunter.
Could fossil fuel investments become stranded assets?
There is some concern in the investment world that fossil fuels could become stranded assets in the future.
Stranded assets are investments that suffer premature write downs due to new regulations, market changes or changes in technology.
Right now, the world is not on track to meet the goals set in the 2015 Paris Climate Agreement. Hunter says that if things carry on as they are, then governments will be forced to intervene at some point and put a hard line around emissions. In this situation, fossil fuel companies may actually lose money, if governments restrict them from selling what they’ve dug up.
“For investors that becomes a stranded asset, meaning you can’t get the value out of that investment,” says Hunter. “When we do have those big changes in society, if you are investing in those high polluting industries your investment will be at a big risk.”
Bushfires, flooding and pandemic highlight need to invest ethically
The importance of ethical investing is something that seems to be more on Australians’ radars. According to a survey conducted earlier this year, over two-thirds of Aussies do not want their money to be invested in environmentally damaging projects.
Hunter says events like the bushfire crisis, flooding and the Coronavirus pandemic have really highlighted to people the need to invest ethically.
“It really makes you step back and think, ‘well, this change that is happening in the environment is real and it’s having an impact on me today’,” she says.
According to Hunter, Future Super was in SuperRatings’ top 10 balanced investment options for the last three months straight, despite obvious challenges.
“While other funds have been up and down, we’ve delivered positive returns for the 12 months to the end of May and expect to deliver positive returns to the end of the financial year,” says Hunter.
Hunter puts this positive performance down to the types of investments Future Super has and doesn’t have. This includes not investing in the airline industry, alcohol, tobacco and gambling. All of which have been hit hard while people have been unable to travel and unable to go out to pubs and clubs.
Invest with your values
The question is, how do you start aligning your super with your values?
Hunter names banking, superannuation and electricity as the three biggest things to review when trying to make sure your money is leaving a positive impact on the planet.
“Put them on your to do list, work through them, ask your friends for recommendations, do online research and make the switch. It’s a lot easier than you think, once you start looking into it,” she says.
Hunter also suggests using independent sources such as the Ethical Advisers Co-op for superannuation and Market Forces for banking, insurers and superannuation.
“At its core, ethical investing is investing in a way that doesn’t make profit at the expense of people or the planet,” she says. “With superannuation it’s important to understand that it is a long term investment and what the world is going to be like at the time you access your money is just as important as how much money you’re going to have to spend.”
Want to read more about companies that are balancing purpose and profit? Why not check out our article: Balancing purpose and profit: B Corp companies aim to do better.