How does sustainable super stack up?

‘Sustainable’ investment funds are exposed to the same challenges as traditional funds.

Does sustainable super stack up?

Super members searching for a ‘sustainable’ investment fund are exposed to the same challenges as those in more traditional funds.

According to new research on the sustainable superannuation sector by research house SuperRatings, the sector delivers a wide range or performance outcomes and charges a range of fees.

The SuperRatings research reveals that the median performance of ‘sustainable’ investment funds is lower than the median performance of the SuperRatings SR50 Balanced (60–76) Index, which comprises traditional balanced super funds.

Furthermore, the ‘sustainable’ funds have higher median fees.

The combination of the two means that a sizeable number of ‘sustainable’ funds produce sub-optimal returns at relatively high fee levels.

‘Sustainable’ funds include funds that select their investments based on environmental, social and governance (ESG) factors.

However, there are ‘sustainable’ funds that outperform the market, while others also have lower fees than many balanced options.

The top quartile of 'sustainable' funds has delivered a 10-year return of 8.9 per cent or more per annum, which is in line with the SR50 Balanced (60–76) Index.

The table below shows the top returning super funds that are classified as sustainable due to the fund’s incorporation of ESG and socially responsible investing criteria.

HESTA’s Eco Pool balanced option delivered the top return over 10 years of 11.1 per cent per annum, which is considerably higher than the SR50 Balanced (60–76) Index return of 8.9 per cent per annum.

Top performing sustainable super funds

Fund

Total fee on
$50k balance

10-year return
(% p.a.)

HESTA - Eco Pool

$670

11.1%

VicSuper FutureSaver - Socially Conscious Option

$463

10.3%

AustralianSuper - Socially Aware

$448

10.0%

WA Super Super Solutions Pers - Sustainable Future

$573

9.5%

UniSuper Accum (1) - Sustainable Balanced

$281

9.3%

Sustainable Balanced option median

$662

8.5%

SR50 Balanced (60-76) Index median

$606

8.9%

There are a range of factors that must be taken into account when assessing the extent to which ESG factors affect a fund’s investment decisions, as well as the cost involved.

For example, some funds may apply a simple screen on certain industries, while others may conduct more in-depth analysis on individual businesses, which may justify a higher fee. This makes it difficult to provide a definitive ranking of sustainable fund performance.

“When considering sustainable alternatives, it is important to look at each individual fund’s mandate, their process for investing sustainably, and of course the industries and businesses they do and do not invest in,” said SuperRatings executive director Kirby Rappell.

“When we speak to financial advisers, they tell us that ESG factors are becoming more and more important for their clients.

“Advisers need the capability to examine and compare sustainable funds to ensure that the product is the best fit for their client both in terms of their risk and return preferences, as well as their social and environmental values."

Do you invest in sustainable superannuation? Why? Why not?

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COMMENTS

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TREBOR
27th Mar 2019
11:19am
How does sustainable super stack up?

Never and in no way in its present guise - costs are too high and the tax structure needs to be fully and properly reviewed so it only bites once. Furthermore, super money put away is YOUR money, same as if you bank it, and you are free to do with it as you choose, even leave it in a will or pass it on to a surviving spouse. It doesn't just vanish with the owner of it.
Bren
27th Mar 2019
11:23am
Average fees 1.32% ($662/$50,000 * 100).
TREBOR
27th Mar 2019
12:05pm
Massively disproportionate on the low-enders or those with broken employment who continually pay fees even when nothing is coming in.

**Bro shorten and The Sheila's Party need to try to get their minds around that and a few other things when discussing handing out preferential super conditions to women only. Pay one for time of - you pay everyone for time off....
Paddington
27th Mar 2019
11:15pm
Trebor, men don’t get pregnant or breastfeed. Equality will occur when men take over the bearing of children and all it entails.
Bren
27th Mar 2019
11:23am
Average fees 1.32% ($662/$50,000 * 100).

27th Mar 2019
12:13pm
A 10 year average is misleading. What we need to know what the funds paid out in the past 12 months. Our fund has a very good 10 year average but in the past 12 months it just about broke even. Talking to other retirees has disclosed that some super funds lost money in the past 12 months.
Rae
27th Mar 2019
1:34pm
Having just had 10 years of booming asset prices you'd expect the 10 year average to be spectacular. All that QE money blowing bubbles in markets everywhere. It's been a terrific ride.

Expecting it to last is incredibly optimistic of savers though.

There is always a negative return year now and then. Sometimes full blown corrections when everything is as overpriced as the last few years.
KSS
27th Mar 2019
12:37pm
"The combination of the two means that a sizeable number of ‘sustainable’ funds produce sub-optimal returns at relatively high fee levels."

Just like 'sustainable energy'then!
Tom Tank
27th Mar 2019
12:59pm
A somewhat political statement.
Tom Tank
27th Mar 2019
12:59pm
A somewhat political statement.
Rae
27th Mar 2019
1:39pm
There are always boutique buyers and those willing to pay a bit more to feel trendy and "good". Like paying the carbon offset for flights and such knowing full well it's just money making by someone.

Or buying certain organic produce when that particular item is always organic anyway.

People like to "feel" that they are "doing the right thing" regardless of reality.
Charlie
27th Mar 2019
3:56pm
Never used it. Spent all my super in 5 years.

What does it mean anyway, getting paid in installments or getting the profits from the investment?

I suppose it is all still recognized as income when put up against disability or age pension.
musicveg
27th Mar 2019
4:01pm
Never mind the sustainability what about whether your super fund is supporting the killing of men,women and children in Yemen. This is a list of those companies invested in Australian Arms EOS that are selling arms to fight in Yemen:
AustSafe Super
CareSuper
Cbus
Energy Super
First Super
HESTA
Hostplus
Legal Super
LUCRF Super
Media Super
Maritime Super
MTAA Super
NGS Super
REI Super
Ask your Superfund to stop investing in killing people.
TREBOR
27th Mar 2019
7:03pm
Join The Trebor Fund - all loans put out at interest go to Australian infrastructure projects.. for Australian people...