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Super’s best-in-show list needs to consider ESG: Investment association

list of top 10 super funds, ESG, investment

The proposal for new super fund members to select from a “best-in-show” list needs to factor in funds’ responsible investment approach, a major association has argued.

The Responsible Investment Association Australasia (RIAA) has argued that the proposed list of the top 10 super funds should be formed with responsible investment tenets in mind.

In its draft report, the Productivity Commission suggested new super fund members select from a list of top 10 super funds drawn up by an independent organisation. This would be in place of default products selected by an employer or dictated by an award, and would be the only default process to prevent workers accruing multiple accounts and subsequently paying multiple sets of fees.

However, according to the CEO of the RIAA, Simon O’Connor, this list of funds should be formed with an environmental, social and governance (ESG) consideration.

“It is our overarching recommendation that any such assessment of funds in a best in show list or other assessment of funds must require an assessment of their responsible investment approach, and that this assessment must be a critical component of their eligibility to any best in show list,” he, along with the RIAA, argued in a submission to the Productivity Commission.

“In our view, a fund should be required to be able to demonstrate their commitment and implementation of a responsible investment approach beyond merely having a public commitment or policy with no evidence of further implementation.”

The Productivity Commission also called for “clearer, simpler and more widely applied product dashboards” to help member compare super products.

Responding to this recommendation, Mr O’Connor said these dashboards would be strengthened by a requirement for funds to display products’ approach to responsible investing. He said such a metric would make them more useful and emphasise the importance of responsible investing in terms of both financial and ESG outcomes.

The sector is already edging this way, RIAA argued, noting that many funds are implementing “detailed and robust” responsible investment strategies, with 80 per cent of the largest funds possessing commitments to responsible investments.

RIAA research shows that nine in 10 Australians expect their super to be invested ethically, Mr O’Connor noted.

“A focus purely on the size of the super fund balance at the point of retirement is no longer adequate as the sole measure of delivering outcomes for members,” he argued.

“As funds gain in scale, those capital allocation decisions behind that $2.6 trillion of assets in superannuation are increasingly shaping our economy and society within which our members live and will retire.

“From this perspective, a considered and properly implemented responsible investing approach – one that considers this full range of investment risks, opportunities and outcomes is critical for super funds to be truly delivering the best outcomes for members.”

Super’s best-in-show list needs to consider ESG: Investment association
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