Is Your Super Supporting Unethical Industries?

Guns, gambling and tobacco – just some of the industries being supported by Australia’s $2.7 trillion superannuation industry.

For many Australian workers, superannuation is something that doesn’t mean anything much until they retire and can get their hands on it.

But superannuation accounts have an impact in the real world as long as the accounts exist – in terms of what they’re invested in. And for many people, that means their money might be invested in industries that they don’t personally agree with.

“Most mainstream funds will invest across the economy, so that means fossil fuels, that means coal, gambling, tobacco, weapons,” says Dr Stuart Palmer, Head of Ethics Research with investment and super fund Australian Ethical.

Simon O’Connor, CEO of Responsible Investment Association Australasia, points out that that can make a much bigger difference to the world around you than simple purchasing decisions.

“Many of us in Australia spend a lot of time thinking about where our chocolate and our coffee comes from, whether its fair trade, whether our eggs are free range, but very few of us take the time to look at where our superannuation is invested,” he says.

Traditionally super funds have been focused on maximising returns, but increasingly, people are demanding a more ethical approach to super investments.

Not that the two goals are mutually exclusive – indeed advocates of ethical investment point out that it’s the best way to ensure sustainability for the long term.

“Ethical funds are performing more strongly than their mainstream funds, and this basically comes down to the simple fact that more sustainable companies make better investments,” Simon adds. “Companies that abuse their workers, that pollute the environment, that breach laws - they’re the companies that don’t perform as strongly overall.”

Super funds can invest ethically in two basic ways, either by choosing to invest in positive industries like healthcare and renewable energy, or by screening out negative industries.

Dr Bronwyn King heads up Tobacco-Free Portfolios, which is hoping to get super funds to pledge to completely divest themselves from interests in the tobacco industry. So far 45 funds have signed up.

“I’m a cancer doctor and my early experiences in medicine were helping and treating patients who were suffering as a result of lung cancer,” Bronwyn says.

“So once I discovered that in fact I was investing in tobacco companies that made the products that were killing my own patients, I couldn’t do just nothing.”

Recent data has found that responsible investment funds now make up 12 percent of the Australian financial market. The move towards ethical investments now putting pressure on the corporations themselves to act more ethically, so as to not alienate big investors.

To search for funds that match your ethical priorities, visit the Responsible Returns website.

However, many super funds are still investing in businesses with question marks over their ethical behaviour.

It’s been revealed that Australian super funds under the management of fund manager IFM are among the major investors in a company called Electro Optics Systems (EOS), which recently signed a half-billion dollar contract to supply Saudi Arabia and the United Arab Emirates with a remote weapons systems unit.

The UAE are part of the Saudi-led Coalition which have been accused of committing war crimes in Yemen.

Statements from EOS and IFM regarding Saudi Arabia and Yemen.

An EOS spokesman released the following statement:

“EOS defence products are exported from Australia to allies and coalition partners of Australia and the USA, and access is subject to simultaneous formal approval by both those countries. This dual restriction renders those products amongst the most highly controlled in the world, since both the USA and Australia closely observe the laws of armed conflict and apply high standards for human rights.

“Normally it is up to the two controlling governments to determine the applications and users they support, as no other entities have the resources required to objectively assess all relevant factors.

“No EOS product has ever been deployed to or used in Yemen.”

IFM Investors said they could not confirm which funds had holdings in EOS, but provided the following statement to The Project:

“IFM Investors has received assurances by the company that Australian Government and Saudi internal processes around this purchase, will mean that EOS platforms will not be deployed in Yemen. If IFM Investors receives information relating to misuse of the products supplied by EOS or any other company, we will seek to engage with the company and will re-evaluate our position. Following your inquiry, we have sought and received further explicit assurances from both our external research provider and the company."