Two of the most sustainable superannuation funds around are celebrating. One, Australian Ethical Investment, notched up a cool one billion dollars of funds under management as of late November.
The other, Future Super, which launched just under five months ago with a promise to avoid fossil fuel investments altogether, hit the $30 million mark and celebrated its 1300th member on Tuesday just before we called to see how things were going.
According to Adam Verwey, executive director of Future Super and a founder along with Simon Sheikh, it’s good news all round, but the best part is that all but four per cent of the new members are not coming from other ethical or sustainability funds but are new to the field and seizing the opportunity to turn consumer power into activist power.
Verwey says, “It’s going really well. We’ve had a really strong five months and I can’t see any slowing down in the momentum; it will continue.”
So who are the people flocking to a fossil free investment universe?
“We’re getting two groups of people,” Verwey says. “Those who are particularly concerned on ethical issues and those who are concerned about climate change and using their consumer power to take action.”
Interestingly (or maybe not when you think about it) the majority of the new members are split roughly 40:40 between the 25 to 35 year age group and the over 50s.
The gap in the age group demographic, between 35 and 50 years of age, reasons Verwey, is probably made up of people probably hunkering down raising kids and struggling to stay afloat on a day-by-day basis.
The older demographic is leading Future Super to fast-track a pension option.
Most of the members, Verwey says, are “urban professionals attuned to climate change and its implications for most of their life and aware that taking consumer action can be political”.
Another interesting factor is the strongly female membership and “quite high” levels of education.
These people also want to apply a negative screen to investment such as gambling, tobacco and armaments.
The positive screens for the fund include seeking renewable energy, recycling, green buildings, health care such as Cochlear and communications. Telstra is an “okay” investment, Verwey says.
Other companies inside the ethical investment universe include banks such as Bendigo, Adelaide and Suncorp, but not the “big four”.
Investment manager Grosvenor Pirie has the job of sorting the wheat from the chaff. The full list is available here. The list alone is a breakthrough piece of transparency, since most superannuation funds closely guard what they do and don’t invest in.
“Our main point of difference is that we have that screen on fossil fuels. A lot of people are not aware that other funds invest in fossil fuels,” Verwey says.
Verwey points out that even some of the ethical funds invest in fossil fuels. Australian Ethical doesn’t invest in coal but it does in gas (according to previous comments from AE the reason is that there is a perceived need for transition fuels and that to suddenly switch off the taps to fossil fuels would create hardship for many).
The website for Market Forces has a tool to help people compare super funds based on their investment basket.
So far, says Verwey, Future Super is the only super fund to screen out fossil fuels entirely.
“The other screen that’s important to us is to not invest in banks who invest in fossil fuels.
“Some of them are better than others. But even a bank like Westpac is funding the expansion of the fossil fuel industry to the tune of billions of dollars.”
Verwey says the NAB and Westpac are the least exposed of the Big Four banks and ANZ is the most exposed.
Also interesting in this new anti-fossil fuel empowered set of investors is that members are joining an ethical fund for the first time, Verwey says.
“Less than four per cent are coming from other ethical or sustainable funds.”
The big losers are the industry super funds, such as AustralianSuper, REST and HOSTPLUS.
According to Verwey the appetite for targeted ethical investment is on the rise.
“One of the things we notice people far more aware of what their money is doing, whether in super or managed funds and there are taking much more interest and want this to be aligned with what they’re interested in.”
The other big winner on this landscape is Australian Ethical.
At one billion of funds under management it is now a serious player on the investment landscape. But it’s also profitable.
Over the year, the company’s profit growth was 139 per cent with net inflows of $92 million compared to $2 million the previous year, and the share price also increased by 82 per cent.
AE’s flagship Australian equities fund, the Smaller Companies Trust, ranked:
- first over seven years
- second over 10 years
It showed returns of 10 per cent a year over its 20 year history, “far exceeding its benchmark index”.
AE’s diversified equities fund, the Larger Companies Trust, ranks first over the one, two and three-year periods and third over seven years.
The International Equities Trust won best international fund at the Australian Fund Manager Award.
AE managing director Phil Vernon says this is proof that not only is ethical investment on the way up in consumer priorities, but that it can pay well too.
“It is an absolute myth that returns need to be compromised to invest in an ethical manner and our strong track record is living proof of that,” Vernon says in a media statement announcing the results. “Investing ethically is not just the right thing to do, but the smart thing to do.
“People from all walks of life really do care about the future of the planet and social values and want those values reflected in the products they consume and the investments they make,” he says.
“They don’t expect to compromise on price, performance or quality of service in order to achieve it and we wholeheartedly agree.
“It is an absolute myth that returns need to be compromised to invest in an ethical manner and our strong track record is living proof of that. Investing ethically is not just the right thing to do, but the smart thing to do.”
Among the good news was that client growth at 20 per cent a year compared with flat industry growth rates. Social media activity helped with 40,000 Facebook fans being part of the uptick in activity.