Responsible investing pays real dividends. That's the verdict of a survey released Friday by the Responsible Investment Association Australasia, which analyzed the returns of almost 60 of Australia's largest superannuation funds. It found the funds with comprehensive responsible investing policies returned about 1% more annually than their peers over one, three and five-year time frames.
"This reinforces how important the consideration of environmental, social and corporate governance factors is to delivering the best possible outcomes for super fund members," RIAA Chief Executive Simon O'Connor said.
Australia's superannuation industry — home to the world's fourth-largest retirement savings pool at A$2.9 trillion ($1.98 trillion) — has been shaking off its reputation as a sector that consists mainly of passive investors. Funds have been active in integrating more ESG factors into their portfolios as the harsh realities of climate change and corporate malpractice seize public attention.
The changes have also led to a hiring spree — responsible investment employee numbers have doubled since 2018 and quadrupled since 2016, the survey found. And almost twice as many funds now report their responsible-investment activities compared to last year as members become more aware of ESG issues, the report said.
That increased pressure from superannuation funds on companies they invest in has lead to behavioral shifts. There's been a ban on single-use plastic bags at supermarkets, mining companies have pledged to take more action on climate change and firms have appointed more female directors.
Australia's biggest super funds recently helped force the early retirement of Westpac Banking Corp.'s Chairman Lindsay Maxsted and the resignation of CEO Brian Hartzer after the lender was accused of breaching anti-money laundering laws more than 23 million times.
But more can be done. Of the 57 superannuation funds surveyed, which accounted for A$1.75 trillion in assets under management, just 13 articulated and demonstrated a comprehensive approach to responsible investment. Less than one-fifth systematically considered climate change at board meetings despite financial regulators viewing it as a foreseeable risk, the report found.
"We are encouraged to see a doubling of super fund boards systematically considering climate risk," Mr. O'Connor said. "However, there's possibly still three-quarters of trustee boards inadequately accounting for climate risk in the face of increasing materiality, relevance and rising regulatory expectations."
