How can I invest my Super in an Ethical Way in Australia?
What is Ethical Investing?
Ethical investing, aka sustainable investing or socially responsible investing is where you consider not only the returns of the investment but also the implications of ESG (Environmental, Social and Corporate Governance). Ethical funds will screen out investments such as firearms, fossil fuels, pornography, gambling, tobacco and/or other types of investments that do not meet their ESG definitions.
There is a lot of demand for these types of investment options, the Responsible Investment Association of Australia (https://responsibleinvestment.org/) identifies 9 out of 10 Australians who expect their super to be invested responsibly and ethically.
How can I access Ethical Investments in my Australian Super?
Well, it’s getting easier. Many super funds do now offer ethical investments. If you have a Self Managed Super Fund or if you use a superannuation investment platform such as BT Panorama, Macquarie Wrap, MLC Wrap, etc. all of these investment platforms have not only an array of wholesale managed funds but can also access exchange traded funds (ETF’s allow you to purchase exposure to a huge number of securities via a single listed share). For example, Betashares (betashares.com.au) offers an Australian ethical share fund (https://www.betashares.com.au/fund/australian-sustainability-leaders-etf/) an international sustainable share fund (https://www.betashares.com.au/fund/global-sustainability-leaders-etf/) and an international ethical bond fund (https://www.betashares.com.au/fund/sustainability-leaders-diversified-bond-etf-currency-hedged/).
Performance
By excluding tobacco and firearms and so on perhaps you’re compromising on returns? This does not appear to be the case with, for example, Betashares ETHI which has had returns of over 13% p.a. in the past 5 years (to 31st July 2020). However, be wary of past returns! By filtering out some stocks these funds can often be exposed to a greater number of tech-related stocks which have had a stellar run, for example, the Betashares ETHI ETF has some of its largest investments in Apple, Nvidia, Paypal, Tesla, and Netflix. Some of these companies could be classified as being at elevated valuations at this time.
Next steps
If you require a financial planner on the Sunshine Coast, Brisbane or the Gold Coast give financial planner Mike Beal a call on 0409 799 279 or send him an email: mike@mikebealfp.com.au.