how to plan for your future while making a positive impact
To have the most comfortable retirement possible, you should want to invest your super contributions in profitable companies. Ethical investments, otherwise known as ESG investments, not only regularly outperform the market average, but they also contribute to a brighter future for our planet and society. Active Super only invests in organisations that are low ESG risks.
ESG stands for environmental, social and corporate governance. By investing with ESG principles in mind, we at Active Super assure our customers that their money is contributing to the betterment of the world, and it’s not doing anyone harm.
But what exactly is environmental, social and corporate governance, and why is ethical investing important?
The basics of ESG
ESG, as a concept, is a holistic way of measuring how ethical a company is. Since ethics can encompass a lot, let’s break down ESG into its three main components:
E: E stands for ‘environmental’. Active Super takes environmental responsibility very seriously — in fact, we are one of only five super fund providers in Australia to be certified carbon neutral through Climate Active. With global warming an imminent threat to our planet, we believe all organisations should be focused on creating positive environmental change.
Companies can demonstrate their commitment to the environment in many ways. For example, they can invest in carbon offsetting initiatives and implement policies that reduce their own carbon footprints. Organisations that show little regard for the environment are the ones burning fossil fuels at alarming rates and producing materials that are harmful to the environment. These are the types of companies that we stay away from.
S: S stands for ‘social’. This refers to both the internal and external social practices of an organisation. For example, company culture and employee treatment plays a large role in the social ethics of a company. Additionally, how a business interacts with its community and responds to political events is significant.
Active Super only invests in companies that have a positive social impact. We do not do business with organisations who have treated their workers unfairly, nor do we invest funds in companies that specialise in products that harm the well-being of others.
G: G stands for ‘corporate governance’, which refers to the power structure and decision-making process of an organisation. It encompasses a lot within a company, from their overarching vision to changes in leadership.
Investing in businesses with ethical corporate governance means looking out for moral business practices. Companies with high amounts of discrimination, nepotism or other repugnant governing practices are high ESG risks. Additionally, organisations that are dishonest to their customer base about their products or services, or what they do with customer data, also show questionable ethics.
Why ethical investments are important
When you invest money in your super, that money goes towards other organisations and helps them grow. Contributing money to companies with little regard for their environmental or social impact can cause damage. These investments give unethical companies more power to create harm in their communities and the world.
Investing in companies with little ESG risk, however, can have a positive effect on the same scale. Organisations that are combating climate change, poverty and other important challenges need investments to continue growing their operations and creating positive change.
ESG investing is especially important when you consider future generations. The impact that corporations today have on the environment and society could last a long time, and it could alter the course of the future forever. Looking back on your life, you’ll want to be able to say you did everything possible to leave behind a fair, kind and habitable world for generations to come.
Companies with remarkable ESG practices are making a positive impact on the world. That’s why, at Active Super, we believe in directing super contributions towards these investments. Not only will doing this help these organisations grow the scope of their impact, but it also gives our customers peace of mind in knowing that they are creating a brighter future for the planet while planning for their retirement.
Some of the practices that we believe enhance an organisation’s ESG performance are limiting their carbon footprint and investing in or conducting carbon offsetting projects, which can include reforestation, recycling and more. We also search for organisations with exceptional corporate policies that enhance the lives of their workers and the members of their communities.
Investing with ESG principles in mind does not only mean searching for exemplary organisations — it also means avoiding businesses with questionable ethics. There are some practices that have negative effects on the environment and society, and we actively choose not to invest in those companies because those investments would provide direct aid for these harmful activities to continue.
There are some industries in which we will not invest any money because we believe the harm they cause is not worth any potential profit we could gain. These companies include those that derive revenue from controversial weapons — such as land mines, cluster bombs and nuclear weapons — as well as tobacco.
Additionally, we will not invest in organisations that derive more than 10% of their revenue from armaments, gambling, old-growth logging and uranium mining. Also, we do not contribute funds to companies who achieve more than a third of their earnings from carbon-intensive activities, like coal mining, oil tar sands and coal-fired electricity generation.
These organisations are high ESG risks, meaning that the industries themselves produce risk. Some products, like tobacco, are dangerous to public health. Others, like certain weapons, put safety and stability at risk both in and out of Australia. We have high standards for the organisations in which we invest, and we will not compromise our values for profit.
When you invest money in your super, you don’t always know exactly where it’s going. However, with Active Super, you have the power to choose your investments. Also, Active Super is a certified responsible investor, so you have the comfort of knowing that no matter where your super contributions go, you will always be making a positive impact.
Learn more about our responsible investment approach and how we're making a difference.