Australia’s biggest superannuation funds are stepping up their ethical investing efforts amid growing pressure from members and external lobby groups for them to take a stronger environmental stand.

As part of this, more funds are introducing share investment options that enable investors to avoid exposures to companies involved in fossil fuels production, the making of tobacco products, or industries linked to human rights violations such as those associated with the use of slave labour.

Among those spearheading the environment and social governance (ESG) push is industry super heavyweight AustralianSuper, which is about to launch a new investment option called ‘Socially Aware’.

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Set to go live on May 30, the investment option will exclude holdings in oil, coal and gas stocks, uranium miners, tobacco companies, groups involved in munitions production, and any company flagged to be involved in human, environmental or governance controversies.

The ‘Socially Aware’ option also won’t invest in ASX 200 companies with single gender boards, for example those without any female directors.

The growing environmental push

AustralianSuper joins other large industry funds including HESTA and First State Super, which now all have investment alternatives for members wanting to avoid holdings in fossil fuels and other unfavourable industries.

Tobacco companies are off the investment agenda. Photo: Getty

Market Forces executive director Julien Vincent said more funds were now taking an active interest in divesting their investments in companies involved in areas such as fossil fuel production.

But he added that many individual investors were still oblivious to how their superannuation funds were invested, and he urged them “to use their membership to lobby for change” at the fund investment level.

“We’re all about connecting the dots between individuals and environmental and social investment outcomes.”

Funds focus on renewable energy

Vision Super told The New Daily it is considering the introduction of a fossil fuel-free investment option as part of its efforts in recognising and responding to climate change.

“We have devoted a great deal of time and resources to responding to the threat of climate change, and we have decreased much of the risk of exposure to fossil fuels through divestment in equities with a high carbon exposure,” chief executive Stephen Rowe said.

“Our investment philosophy under this policy has seen Vision Super become an early adopter of strategies to invest more in renewable energy.

“This includes a 100 per cent investment in a wind farm in Victoria – which provides low emissions energy for 7000 Victorian households. We are one of very few super funds to outright own a wind farm.”

As well as only investing in companies with low carbon exposures, Mr Rowe said Vision Super had switched equities managers and invested in a low carbon mandate with Perpetual.

Shareholdings force boardroom action

Australian Council of Super Investors chief executive Louise Davidson said that as major investors in the Australian share market, industry funds were now in a position to deal directly with large companies on their ESG policies.

Vision Super owns a wind farm in Wonthaggi, Victoria. Photo: AAP

“One of the benefits of owning a large stake in a company is it gives you a seat at the table and the ability to influence investment decisions,” Ms Davidson said.

“Climate change and fossil fuels are very much on the agenda for super funds. Super funds [work] with companies to make sure they are readying themselves for a lower carbon world.”

Supporting this, a spokesman for AustralianSuper said: “Our approach to this is largely one of direct engagement with the companies.”

Yet one super fund investment manager said the challenge is to gain support for sustainable funds.

“These products only account for a tiny percentage of their overall investment assets. Most funds are wanting to be seen to be there, but in reality these options are getting very low traction at this stage.”

DISCLOSURE: The New Daily is owned by a group of industry superannuation funds.