Counter to expectations (or should that be prejudices?) sustainable funds are outperforming mainstream funds. But how many of us have boarded the green bus? Equally important, how many funds take sustainability seriously?
There’s a theory that when times are tough, personal values are thrown out the window. (And why wouldn’t such a theory exist? There’s a theory for every phenomenon. And for every theory there’s a counter theory.)
If the theory is correct, then the GFC should have resulted in all of us shelving plans to go solar, buying a Prius and generally reducing our carbon footprints to zero.
If the theory’s correct, the GFC would also have caused many of us to postpone any plans to move our super into a sustainable investment option. That’s understandable.
Experience with early organic foods is strong in our memories. We liked the idea of going organic but weren’t quite prepared to pay double for undersized, insect-nibbled and bruised produce. We were slow adopters simply because early examples didn’t deliver the goods.
Many of us have approached sustainable investments just as warily. As much as we might have liked the idea, our expectations have been that we’d be sacrificing returns to ease our conscience.
Guess what! SuperRatings’ Fund Sustainability Review shows that sustainable investments have been outperforming mainstream options by a handy margin. That’s right. Going down the sustainable route doesn’t impede performance, with both the “SR Sustainable Australian Shares Index” and the “SR Sustainable Balanced Option Index” both outperforming comparable mainstream Australian Share and Balanced options.
Based on these results, it looks like we all need to take a closer look at sustainable funds. Contrary to beliefs, it seems we can invest with a clear conscience and actually be in a better place financially as well as morally.
The table below shows the SR Sustainable Australian Shares Index outperforming the traditional SR50 Australian Shares Index by over 1.5% per annum over the last 5 years, leaving those members some 8% ahead of their mainstream counterparts over the same period.
| Option Type | 1Mth | Qtly | FYTD | 1 Year | 3 Year | 5 Year |
|---|---|---|---|---|---|---|
| SR Sustainable Australian Shares | 5.53% | 1.37% | 27.35% | 38.89% | 1.69% | 9.54% |
| SR50 Australian Shares Index | 5.22% | 1.22% | 25.46% | 38.92% | -1.04% | 7.99% |
- For periods ended 31 March 2010
| Option Type | 1Mth | Qtly | FYTD | 1 Year | 3 Year | 5 Year |
|---|---|---|---|---|---|---|
| SR Sustainable Balanced Median | 2.91% | 1.31% | 13.89% | 19.52% | -1.37% | 4.89% |
| SR50 Balanced Index | 2.90% | 1.62% | 13.95% | 18.40% | -1.47% | 4.87% |
- For periods ended 31 March 2010
That’s the good news. Really good news. However the Review revealed something else that might concern the truly passionate ethical investor.
Only one in seven funds is seriously green
After looking at over 70 major Australian super funds covering over 14 million member accounts and representing $390 billion in assets, the Review found just 10 funds qualify for SuperRatings’ Infinity recognition by being market leaders in addressing environmental and social commitments within their funds.
In alphabetical order they are:
- AMP Super (signature Super, Flexible lifetime, Custom Super)
- Australian Ethical Retail Super Fund
- BT Super for Life
- Catholic Super
- Christian Super
- Health Super Fund
- HESTA Super Fund
- Statewide
- UniSuper Fund
- Vision Superannuation Fund
Too much talk. Not enough walk.
The Review revealed that only 6% of funds rate themselves carbon-neutral. Only 48% of funds even bother to measure their levels of carbon, energy, water or waste.
That seems at odds with what the funds say. Two-thirds of the funds agree that climate change is a serious issue and four out of five acknowledge they have a responsibility to operate in a sustainable manner.
Only 38% of funds educate their members on sustainability issues. Less than half openly communicate their stance on climate change. Only a small fraction of funds offer practical examples of implementing complete responsible investment principles.
Many funds appear to be keen to invest more sustainably, but baulk at certain hurdles - regulatory uncertainty, a perceived conflict between doing the right thing for the environment and obtaining the best result for their members.
Well, with sustainable funds outperforming mainstream funds, that’s one hurdle out of the way. What member wouldn’t consider a sustainable product when there’s a good chance it will improve their fund balance?
It looks like it might be time to reconsider Sustainable options. So, which sustainable options are the performance stars? Check out the Top Ten lists.Top Ten.
Will 2010 be the year you go green? Equally important, will this be the year funds commit to sustainability?
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