Ethical super funds in Australia

What is an ethical super fund?

An ethical super fund is one that invests its members' money in an ethical or socially responsible way. Ethical can mean different things to different people, depending on your personal values. But generally, ethical investing involves supporting companies and industries that are making a positive impact on our communities and on our environment, while actively excluding those that are making a negative impact.

How ethical super funds invest your money

An ethical super fund is one that chooses investment options based on a set of social, environmental and ethical criteria. There is no set approach or rule to how ethical funds invest, but here's a list of the investments ethical funds tend to include and exclude from their portfolios.

What don't ethical super funds invest in?

• Fossil fuel production
• Coal mining
• Tobacco and gambling
• Pornography
• Forest logging
• Companies that test products on animals
• Live animal exports

What do ethical super funds invest in?

• Renewable, clean energy projects like wind farms
• Recycling and waste management
• Companies that do not test on animals
• Clean, efficient transport (like electric cars)
• Healthcare and education
• Innovative technology and sustainable products and manufacturing

Some ethical investment funds also conduct a "best of sector" approach. This involves looking at a particular sector, for example banking, and selecting the companies/s that best meet its ethical criteria. For example looking at all the banks, and instead of deciding that none meet the ethical criteria, investing in the one that is the closest fit. This way, you're still benefiting from the investment diversification and performance of that sector.

How to compare ethical super funds

There are several factors you should consider before choosing an ethical super fund, including:

Accreditation

The Responsible Investment Association of Australasia (RIAA) offers a Responsible Investment Certification to certain funds that meet its criteria. Some fund that have received this accreditation are Australian Ethical, UniSuper, Aware Super, Future Super and Australian Retirement Trust. A fund doesn't need to have this certification to be considered 'ethical', however it's handy to know that those that do have been independently verified.

Performance

While past performance does not indicate future performance, it's definitely worthwhile checking a super fund's investment performance to see the returns it has generated over the long term (for example 10+ years).

The companies it invests in

Take a closer look at the individual companies the fund will invest your money in. You'll find this information on the fund's website, or by contacting the fund directly. Are there any there that do not align with your values and beliefs?

Screening process

How rigorously does the super fund screen companies it considers for investment? Does it use negative screening, positive screening and/or a best of sector approach?

The fees

Some ethical super funds can charge quite high fees, in comparison to regular MySuper funds. You may decide this it worth it for you personally, based on your investment values. However, it's still worth comparing the fees among ethical funds themselves as these can vary greatly. A general rule of thumb is to aim for annual fees that are around 1% of your balance or less.

The risk level

Check how aggressively the ethical fund invests in growth assets like shares, and if this aligns with your desired risk level.

Pros and cons of joining an ethical super fund

Pros

• You can invest your money in line with your values.
• Know that your super isn't supporting industries you don't agree with.
• You don't need to sacrifice investment returns to invest ethically.
• There are more and more ethical investments becoming available, giving consumers lots of choice.

Cons

• You might need to sacrifice some investment opportunities.
• Excluding certain industries means your investment portfolio could be less diversified.
• Less choice between super funds, as not all super funds offer an ethical investment option.
• The fees do tend to be higher with ethical super funds.

What's the best ethical super fund?

We've narrowed it down to our 2 top picks, based on a range of selection criteria. However, keep in mind that our top picks may not always be best for you. Based on your situation, you may find certain features to be more or less important, so compare your options before you apply.

Best ethical super fund
Australian Ethical Super Balanced

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+9.71%

1 year performance

+4.18%

3 year performance

+6.87%

10 year performance

• Info
• Fees
• How we choose

Australian Ethical seeks to invest in companies that have a positive impact on the planet, people and animals, such as renewable energy and healthcare while avoiding investments in coal, oil, tobacco and gambling.

Australian Ethical Super has won the super fund category in the Finder Green Awards for the past 4 years in a row. This award looked at each fund's current environmental performance, environmental targets and reporting and accreditation. It also analysed the fund's sustainable investment approach and the environmental performance of its portfolio.

Superfund	Australian Ethical Super Balanced
Fees on $5k balance (p.a.)	$126.50
Fees on $50k balance (p.a.)	$653
Fees on $100k balance (p.a.)	$1,238

Best low-fee ethical super fund
UniSuper - Balanced

Go to site

+10.33%

1 year performance

+5.5%

3 year performance

+7.75%

10 year performance

• Info
• Fees
• How we choose

UniSuper is an industry super fund with more than 620,000 members. Its Balanced option invests in a mix of different asset classes and charges some of the lowest fees of all default super products.

We looked at the ethical super funds in our database and filtered for the fund with the lowest annual fees based on a $50,000 balance.

Superfund	UniSuper - Balanced
Fees on $5k balance (p.a.)	$121.50
Fees on $50k balance (p.a.)	$351
Fees on $100k balance (p.a.)	$606

How to join an ethical super fund

Here's how to change super funds in 4 steps:

1. Choose an ethical fund. The comparison table above can help you choose a new super fund.
2. Join the new fund. Complete the online application form on the fund's website.
3. Move your super into your new fund. Enter the details of your previous fund when you submit the application form and the new fund will arrange for your balance to be transferred over.
4. Let your employer know. Let your employer know right away so they can pay your next super guarantee payment to the correct fund.

Have you decided an ethical super fund isn't what you're after? Maybe one of our best performing super funds picks will be right for you instead.

Frequently asked questions

• What are the different types of ethical super funds?

  There's two types of ethical super funds. The first option is a super fund which only offers ethical investment options to members, like Australian Ethical Super. These funds apply their ethical investment approach across all their products.

  The other option is a retail or industry super fund that offers one dedicated ethical investment option among several other investment options, for example AustralianSuper or Australian Retirement Trust. These funds will usually offer a MySuper balanced investment option as the default option to members, and a socially responsible or ethical option for members who want to select this instead. However, the ethical investment approach isn't applied across all the fund's products.

• What fees do ethical super funds charge?

  Fees vary between funds, but ethical super funds do tend to charge slightly higher fees than some default MySuper funds offered by retail and industry funds. This is because of the comprehensive research that goes into each investment chosen by a responsible or ethical fund. However, you may find that actively-managed retail funds charge higher fees than some ethical super funds.

  A relatively new ethical super fund may charge higher fees than one that has been established for a longer period of time. This is because an increase in the number of members may allow a fund to lower its investment fees.

• Should I invest in an ethical super fund?

  You don't have to invest in an ethical super fund - the decision is completely up to you as to how your super is invested. The basic premise behind ethical investing is that you put your money where your mouth is to support the causes and companies that match your values and beliefs. For example if you're passionate about climate change and want to see the end of coal mining, making sure your super isn't helping fund the coal mining sector is one way you can personally make an impact.

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