With investment analysts showing increasing concern about the negative impacts of fossil fuels on investment portfolios, Future Super has banded together with media and information firm Thomson Reuters to create two new indices of ASX-listed companies that are fossil-fuel free and leaders in environmental, social and corporate governance practices, respectively.
The Thomson Reuters/Future Super Australia Fossil Free Index and the Thomson Reuters/Future Super Australia Sustainable Leaders Index have been designed to give investors improved transparency around ASX-listed companies’ sustainability credentials.
According to Future Super the fossil fuel-free index is the first of its kind in Australia. The sustainability index is also the first in Australia to apply a negative screening on direct and indirect fossil fuels, as well as traditional ESG scoring. It will provide both institutional and retail investors access to the 50 top medium-to-large ASX-listed sustainability performers.
The companies on the list show that ethical investment need not incur a financial penalty with a backtest showing both indices having outperformed the general Thomson Reuters Australia Index over the past couple of years.
The launch of the indices coincides with Future Super’s first anniversary.
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“While a consistent stream of research has been released pointing to the poor recent performance of fossil fuel exposed companies, our fossil fuel free indices will provide potential investors with a day-by-day analysis of the performance of this investment strategy,” Future Super managing director Simon Sheikh said.
He said that since the fund’s launch, over $80 million of superannuation savings had been diverted to a fossil fuel-free investment strategy.
“We expect demand for fossil fuel free investing to increase in the next 12 months.”
An accompanying report to the launch, Fossil Fuel Free ESG Investing: Recent Australian Performance, backed up the claim.
“As the global transition away from dirty energy sources picks up steam, we are beginning to see the financial case for the immediate screening out of fossil fuels,” it stated.
Thomson Reuters’ head of indices Stephan Flagel said the indices would raise awareness of the performance of fossil fuel-free companies and provide investors with a mechanism to invest responsibly.
“With increased pressure to deliver low cost and transparent investment services for Australian investors, we are working with a number of clients such as Future Super to assist in the development of their investment strategies,” he said.