Can super set Australia on the path to net zero?

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June 04 2021
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Australia’s superannuation members can have a significant impact on reducing Australia’s climate impact and increasing their returns at the same time, an industry expert explains.

Can super set Australia on the path to net zero?

Superannuation members looking to increase the long-term performance of their funds are being urged to look into ethical investing as a way to increase their gains.

In a conversation with nestegg, Australian Ethical’s chief customer officer, Maria Loyez, explained that putting one’s money into ethical superannuation funds doesn’t necessarily mean lesser returns.

“We’ve seen responsible and ethical funds prove they can survive – and even thrive – in a crisis. In many ways the pandemic presented an opportunity to examine the relationship between ESG and performance at a time of crisis.

“And the results speak for themselves. Research from many analyses – as well as our own experience at Australian Ethical – shows responsible funds like ours have consistently outperformed traditional funds since COVID,” she told nestegg.

Ms Loyez said that when it comes to ethical investing, the proof is in the pudding.

“In other words, those who invest responsibly know from experience that they don’t have to give up returns. It’s only those who don’t invest responsibly that still hold on to an outdated perception about performance," she noted.

And Ms Loyez appears to be correct, with a recent study by Investment Trends finding the majority of those currently investing responsibly believe you don’t have to give up the returns to follow a more sustainable journey (81 per cent), while 50 per cent of those that don’t invest responsibly are confident a switch would cost them.

Performance stigma has surrounded ethical investing for some time, with investors doubting the odds of superior returns.

Making a difference

Overall, regardless of what side of the debate you’re on, it has been proven that small changes in investment behaviour can have a profound impact on Australia’s overall outlook.

A study released by UTS previously showed that just 7.7 per cent of members’ money was needed to fund Australia’s transition to renewable energy.

The total investment required to transition Australia to 100 percent renewables by 2050 has dropped from $800 billion (calculated in 2016) to $788 billion.

This significant investment is dwarfed by the projected growth of Australia’s collective super savings – already the fourth largest pool of retirement savings in the world – which is projected to grow to more than $6.5 trillion by 2050.

“The climate crisis calls for a response on a similar scale. But, too often, people are unaware that the most impactful lever they have is their money,” Ms Loyez said.

“This is especially powerful in Australia, thanks to our compulsory superannuation system, which means everyone who works is effectively an investor. And with billions of dollars invested in superannuation supporting fossil fuels and other harmful industries, many Australians are unwittingly funding the very thing they are concerned about.”

She also explained that moving to net zero is complex and not helped by the lack of ambitious climate policy in Australia. However, what we do know is that reaching net zero by 2050 doesn’t mean business as usual until 2049. In fact, the carbon curves tell us that not only do we need to get to net zero a lot sooner, the curves become a lot steeper the longer we leave it.

“In the absence of effective climate policy, ethical investing becomes especially important.

“By investing ethically, investors allocate capital to sustainable industries and withhold capital from unsustainable industries. As shareholders, ethical investors also engage with companies about their performance to influence the company’s impact on society. And when like-minded investors band together, ‘collaborative impact’ can be a powerful force in driving change for the better,” Ms Loyez said.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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