ESG investment options displayed lower exposure to materials, energy and financial sectors, while exhibiting higher exposure to communications services, healthcare, and information technology sectors, according to research from Rainmaker Information.
The report, which focused on June 2022 portfolio holdings disclosure data, compared major equities holdings of 69 MySuper products with a sample of 38 specialist ESG investment options offered through workplace super funds.
“Contrary to common perception, the findings highlighted that an ESG investment strategy involves more than simply avoiding certain investments,” said Alex Dunnin, executive director of research at Rainmaker Information.
The analysis delved into the concentration of Australian equities holdings, revealing that the top 10 holdings accounted for 42% of MySuper Australian equities, the top 50 holdings represented 75% and the top 100 holdings accounted for 89%.
As company size decreased, super funds exhibited greater variations from the ASX index weighting, indicating a more active company allocation approach.
While average exposures were similar for MySuper and ESG investment options, ESG products showed reduced exposure to companies such as BHP, Woodside Energy and Transurban, but overweight positions in CSL, Telstra, and ResMed.
International equities holdings displayed higher diversity and less concentration than their Australian counterparts.
The top 50 holdings accounted for just 30% of international equities portfolios, highlighting the wider variations in holdings allocations between not-for-profit (NFP) and retail super funds.
ESG products exhibited clear tilts away from major global technology giants, with exceptions for Microsoft, Alibaba, and Tesla.
Rainmaker Information's analysis also explored fixed income holdings, which were predominantly held through mandates.
Retail funds exhibited a higher proportion of direct holdings compared to NFP funds.
The largest fixed income manager for super funds was IFM Investors, and private debt emerged as the largest direct holding.
“Super funds reported that three-quarters of their unlisted infrastructure and unlisted property investments were held externally through investment mandates,” said Dunnin.
“Conversely, investments in unlisted equity and alternatives were predominantly placed through investment manager mandates.”
AustralianSuper, Cbus, HESTA, Hostplus, and Rest Super are the dominant super funds in unlisted infrastructure, while IFM Investors and Macquarie emerged as the overwhelmingly dominant investment managers in this sector.
Hostplus led in private equity investments, followed by AustralianSuper, Aware Super, Australian Retirement Trust and HESTA.
The largest managers of unlisted property owned by super funds were the Industry Super Property Trust, AustralianSuper, Lendlease and Charter Hall.
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