Ethical Super Options Under the Spotlight

A recent analysis by Mindful Investing, an initiative of New Zealand-based charity Mindful Money, examined some of Australia’s largest super funds, including 16 ethical, sustainable and socially responsible investment options. The review found that, while ethical options generally had lower exposure to controversial sectors than traditional MySuper offerings, ethical labels do not necessarily mean portfolios are free from ethical concerns. Ethical options had an average 5.0% exposure to identified issues of concern, approximately half the level of MySuper options at 10.25%. However, results varied significantly across providers, with some ethical options recording less than 2% exposure and others exceeding 10%, underscoring the different approaches managers take in defining and implementing ethical investing.

Ethical options generally had lower exposure to fossil fuels, gambling, tobacco and weapons than traditional super options. Average fossil fuel exposure was approximately 0.4%, compared with 4.8% for MySuper funds. However, some ethical options continued to hold fossil fuel companies, often on the basis of their perceived transition pathways towards a lower-carbon future. Others remained invested in producers continuing to expand oil and gas production, highlighting differing approaches to balancing transition considerations with exclusionary screening.

A key finding was that ethical options often showed smaller reductions in exposure to human rights and animal welfare concerns. In several cases, exposures remained comparable to those in MySuper portfolios, suggesting these issues are not consistently addressed through ethical screening. Human rights-related concerns represented one of the largest categories of exposure across both ethical and traditional options, driven by investments in global mining, technology and industrial companies. The largest identified exposure was to Rio Tinto, which has been linked to several human rights-related controversies in recent years. Earlier this year, Indigenous communities raised concerns regarding Rio Tinto's proposed lithium project at Salar de Maricunga in Chile, alleging potential impacts on water resources, local livelihoods and cultural heritage.

Similarly, animal welfare concerns remained present in many portfolios through holdings in luxury goods and consumer companies such as Hermès and LVMH.

Super fund investments have real-world consequences. As stewards of trillions of dollars, Australia's super funds are among the most influential investors in the economy, with the ability to shape corporate behaviour and direct capital towards the long-term challenges that will define the nation's future, including human rights, climate change, energy security and the transition to a net-zero economy.

Clients interested in understanding their super fund's exposure to coal, oil and gas can access the Market Forces' action page, which provides information on individual fund

holdings and a template message for engaging with their super fund on the issue, Compare super funds - Market Forces.