Ethical is the buzzword in superannuation—but what does it actually mean?

Over the past few years, ‘ethical’ has become the buzzword in superannuation. A 2017 poll found that 88% of young Australians would switch funds so their money could be invested in a way that aligns with their values. And after the 2019 bushfires, interest in ethical super spiked even more. 

But what does ‘ethical super’ actually entail?

The general idea behind ethical super is putting your money into investments that do right by people and the planet. By investing ethically, we get to support the social causes we care about and take a stand against the things we think need to change. It’s a way to put our money where our mouth is.

But not every ethical fund is created equal. So if you want your superannuation to make a positive impact, here’s a few things to consider.

Wait, what do you mean by ‘ethical’?

Any fund can label itself ‘ethical’ -- there’s no set criteria it has to match first. 

Broadly speaking, though, a fund that promises to operate ethically might exclude or reduce investments in industries like fossil fuels, nuclear weapons, gambling and alcohol.

Other ethical funds might exclude investments in companies that have bad human rights records or a history of animal cruelty.

The only regulatory body Australia has for ethical superannuation is the Responsible Investment Association Australasia (RIAA), a non-government organisation that promotes sustainability. Funds can volunteer to be accredited as ethical by the RIAA but so far, only a handful of whole funds have got the tick of approval.

To get accredited, funds must not invest in weapons or tobacco. But apart from that, the RIAA just makes sure the fund delivers what it claims to. It’s checking funds do what they say they will, not policing their individual ethics.

Another thing to keep in mind is that there is a difference between super funds and products. Some funds, like Super Obvious, exclusively offer ethical investment options. Other funds might offer an ethical investment strategy as an alternative to their ‘mainstream’ super product, which could still invest in industries like fossil fuels.

So figuring out whether a fund invests in the sort of world you want to live in, you might have to dig a bit deeper.

What’s ethical to you?

Not everyone has the same idea of ethics. That’s true of super funds, too.

Christian Super, for example, is one of Australia’s RIAA accredited funds. Part of its investment strategy is supporting renewable energy. However, it also promises not to invest in stem cell research, abortion medication, and IUD contraceptives. Those are Christian Super’s ethics -- but they might not be yours. 

And what one Australian considers ethically essential some might see as a nice-to-have. For instance, specialised vegan super funds may exclude investments in companies that test on animals. For some people, that might be important. For others, it may not be the top priority. 

Australians who are concerned by the climate crisis might be looking for a fund that doesn’t invest in fossil fuels. Some super funds promise a 100% exclusion of fossil fuels, while other ethical funds still earn up to 20% of their revenue from fossil fuels. For some people, a smaller investment in fossil fuels might be okay. Others might want a stronger stance.

You might also want to think about what’s called downstream investments. An ethical fund might not invest directly in tobacco, but it could invest in the supermarkets that sell cigarettes.

So how do I pick a fund that aligns with my values?

Picking the right fund for you really comes down to what your priorities are and what you’re comfortable with.

To check if a fund aligns with your values, you could start by searching the RIAA database. But for a full picture of what a fund does or does not invest in, you may have to check their website or contact them. If they’re committed to their ethics, they should make that info easy to access.

Here at Super Obvious, we believe in transparency. Super Obvious only invests in companies that do no harm to people, the environment and the planet. We believe you can grow your wealth without damaging the world around us.

That means we avoid investments that involve:

• Tobacco and alcohol
• Intensive farming and aquaculture
• Extraction of oil and gas
• Coal and uranium mining 
• Gambling 
• Rainforest and old growth logging
  

If it sounds like our values align with yours - find out more info about Super Obvious today.

The information in this article is prepared by Super Obvious Pty Ltd (ABN 93 646 093 012). It is general in nature as it has been prepared without taking account of your objectives, financial situation or needs.