Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Green super options take root as investors seek real climate impact
With climate change ever more aggressively demanding the world’s attention and action, Australians could have a surprisingly big impact on climate outcomes through their $3.5 trillion in superannuation investments. Super funds are increasingly offering more sustainable investment options – and investors are flocking to greener products.
Lifestyle changes including driving an electric car and using less electricity are common ways people seek to cut their carbon footprint. But many don’t realise that switching to sustainable superannuation funds can save significant amounts of carbon emissions. And the momentum for more environmentally friendly investment options is gathering pace.
The Australian responsible investment market, including superannuation, was valued at more than $1.5 trillion in 2021, according to the Responsible Investment Association Australasia (RIAA). That represented 43 per cent of total professionally managed funds.
Lynette Anderson, a senior financial adviser at Wakefield Partners, says she has observed a heightened interest in ethical and sustainable investing.
“Many clients are now inquiring about the environmental and social practices of the companies their investments are supporting,” she says. “They are seeking investment opportunities that align with their values and beliefs, and they recognise the potential benefits of integrating sustainability into their portfolios.”
Anderson notes that investors are increasingly proactively recommending investments with environmental, social and governance (ESG) aspects as part of core superannuation portfolios. But it’s “an area we need to be careful in”, she says.
“No two people have the same definition of what is ethical and sustainable. Also, many investments in these areas, particularly cleaner energy, are only in a developmental or start-up phase, meaning the risk of holding these investments can be significantly greater.”
The good news is that responsible investing can in fact make a difference to the environment. Research from Make My Money Matter, insurance firm Aviva and data analytics company Route2 finds that choosing a “green” pension could have an impact on an individual’s carbon footprint that is 21 times greater than the combined impact of giving up flying, going vegetarian and switching to renewable energy.
Industry funds lead ESG offerings
HESTA was the first big super fund to commit to net zero by 2050, implement restrictions on investment in thermal coal and obtain certification as carbon neutral for business operations. In addition to portfolio-wide sustainable investing restrictions and exclusions, HESTA has implemented more extensive screens in its Sustainable Growth investment fund.
The fund – which applies exclusions to uranium mining, fossil fuels, tobacco, controversial weapons and asylum seeker detention – returned 11.07 per cent for the last financial year, close to HESTA’s default Income Stream Balanced Growth option, which returned 11.79 per cent.
Another green pension leader is Australia’s largest superannuation fund, AustralianSuper, which provides its Socially Aware option for those specifically looking for sustainable investments in addition to applying its ESG approach across all its investments.
As a long-term investor and asset owner, AustralianSuper says, it’s important that it factor material ESG risks and opportunities into its decision-making.
“We consider a broad range of ESG impacts but prioritise those which we believe present the greatest risks and opportunities to members’ investment returns,” a spokesperson said. “Over the past year the Socially Aware option has grown in member numbers as the fund’s membership rose to 3.2 million – but it has not been stronger growth relative to other options.” The Socially Aware fund returned 7.44 per cent for the 2022-23 financial year.
UniSuper, which manages $100 billion in superannuation funds, says demand is strong for its three dedicated sustainable and environmental branded investment strategies, which are designed to avoid investments in companies involved in the production, generation or transmission of coal, oil or gas. The three funds have over $12 billion in funds under management.
The UniSuper investment option with the most direct exposure to green themes is Global Environmental Opportunities, which invests in companies that derive at least 40 per cent of their reported revenue from environmentally beneficial products and services. The fund’s largest holding as of June 30 was Tesla.
“The green theme continues to attract significant capital,” UniSuper chief investment officer John Pearce said in a recent climate risk report.
“Inevitably, there will be risks involved, and not all investments will be profitable, so discipline is required. We continue to look for opportunities to invest in companies that support decarbonisation while providing attractive returns for our members.”
