The ESG Leader Rating is earned by Australia's best super funds that are implementing environmental, social and governance (ESG) principles to a high level, while having a track record of strong investment performance.
The findings were published as part of Rainmaker’s Superannuation Benchmarking Report.
Five core factors set the framework for assessing the funds, being:
1. Governance: The fund publicly declares its commitments to ESG principles.
2. Investment transparency: The fund discloses what it invests in and how it engages with companies into which it invests.
3. Publishes ESG reports: The fund reviews and discloses its environmental, climate change and social impacts.
4. Investment processes: The fund discloses the investment practices through which it implements ESG principles regarding how it invests.
5. Performance: The fund achieves its investment objectives, achieves competitive investment returns all while satisfying the Sole Purpose Test as required by the Superannuation Industry (Supervision) Act.
“Australia’s super funds are among the most committed in the world to implementing environmental, sustainability and governance principles into their investment practices,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.
“Australia has 43 super funds that either identify as ESG super funds, i.e., they are a signatory to an ESG protocol, they offer ESG investment options or they follow standard ESG practices.”
Dunnin said this is from a combined pool of almost 120 eligible super funds, meaning one-quarter have been awarded the Rainmaker ESG Leadership Rating.
Almost90% of ESG super funds publish a climate position statement, 82% publish a Modern Slavery Act statement and 73% disclose their investment screening processes.”
Alongside their transparency and commitment to ESG principles, the 2022 ESG Leaders have been able to show that they can maintain strong performance.
ESG superfunds as a group were found to have achieved investment returns that only marginally underperformed the regular Rainmaker MySuper median over three and five years.
Dunnin said: “As important as ESG is, the primary goal of any super fund’s trustee board will always be to maximise their fund members’ retirement savings in relation to the investment risks taken to achieve these returns. This means investment returns are a pivotal aspect of the ESG assessment.”
“Superfunds should be active investors, not activists,” he added.
Other facets considered in Rainmaker’s 2022 ESG review were a fund’s net-zero commitment,gender diversity among its management and senior executives, investment screening and the quality of their portfolio holdings disclosures.
The ESG Leader superfunds for 2022 are:
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