The best super funds for ESG revealed
A new analysis by Rainmaker Information has identified 32 superannuation funds as leaders in ESG principles and strong investment performance.
These 32 funds received Rainmaker’s first ESG Leader Rating.
In total, Rainmaker Information has identified 43 super funds that identify as ESG super funds in that they are signatories to an ESG protocol, offer ESG investment options, or follow ESG practices. standard, out of a combined pool of almost 120 eligible super funds. funds.
Rainmaker also identified the best performing ESG super funds, based on five-year MySuper returns. Aware Super leads with a return of 11.38%, with Active Super in second place with 10.10%. This is followed by Hostplus with 10.03%, AustralianSuper with 10.01% and TelstraSuper’s MySuper option in fifth place with 9.91%.
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Other super funds to make the list include Australian Ethical, BT Super, CareSuper, Equipsuper, Future Super, HESTA, Prime Super, Spirit Super and UniSuper.
This is the second year that Rainmaker has assessed the super fund industry for its ESG qualities through the Rainmaker ESG Superannuation Taxonomy Study 2022. Rainmaker calculates that ESG super funds manage $1.8 trillion, representing 71% of the Australian institutional pension market (regulated by APRA).
Rainmaker assesses the elements of a quality ESG super fund along five dimensions: governance, or how the fund declares its commitments to ESG principles; investment transparency, or portfolio-level disclosure and disclosure of engagement with investees; publication of ESG reports; disclosure of the investment process and how a fund implements ESG principles; and performance, or whether the fund achieves its investment objectives and passes the single objective test.
“Funds have clearly stepped up the way they try to explain their ESG implementation,” said Rainmaker’s executive director of research, Alex Dunnin.
“They publish more information, it’s clearer and more complete.”
Nearly 90% of ESG super funds publish a position statement on climate, while 82% publish a statement on the Modern Slavery Act and 73% disclose their investment selection processes.
Two-thirds of ESG super funds have explicitly stated a target year of net zero no later than 2050, while Rainmaker notes that a small number of ESG super funds have even stated that they aim to be net zero by 2030 .
“Funds are also trying to reflect the Paris Treaty and commitments arising from COP26 in greater detail in terms of how they describe their net zero commitments, investment processes and how they can try to integrate the objectives of sustainability rather than simply declaring their investment screens negative,” added Dunnin.
“More funds are also filing statements on the Modern Slavery Act.
“In short, just as the concept of ESG has progressed and become more in-depth, so has the way many super funds are trying to address all the issues that this entails.”
The report also revealed that the number of ESG super funds using positive filters increased from 52% in 2021 to 80% in 2022.
“To get investment returns, super funds have to actually invest in things,” Dunnin said.
“You can’t rule everything out and give everything away. Either way, it just gives control of the economy to other people who may not care about the future.
“While it may seem like a silly thing to say, more and more funds are shifting the conversation from what they exclude to what they include. engagement with the companies and projects in which they invest.”
But that can have a downside, Dunnin noted.
“It exposes every ESG super fund and every decision they make to criticism, often from their biggest supporters who are their members,” he said.
“But as super funds grow and become much more powerful economic players in Australia, and the world for that matter, the way super funds do this and implement their policies must evolve and become more robust.”
The Rainmaker ESG Leader 2022 retirement funds are:
|Account name||FUM (billions of dollars)|
|Aussie Super Catholic||10.9|
|Aussie Super Ethical||4.0|
|Australian pension trust||117.2|
|Commonwealth Pension Society||48.7|