Home Product listing How do I know what my superannuation fund is investing in? A financial expert explains

How do I know what my superannuation fund is investing in? A financial expert explains

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You want your retirement savings invested in things that also serve the long-term interests of the planet. But how can you be sure that your fund’s values ​​match yours – or even its own claims?

This question has become increasingly relevant as the demand for environmentally and socially sustainable investments grows – and with it the incentives for financial institutions to give the best spin on their offerings.

A consulting firm specializing in “responsible investing” estimates that 10% of the funds it has examined do not have the sustainable orientation they claim.

Among those accused of greenwashing in recent months is one of Australia’s largest super funds, HESTA (the industry fund for health and community service workers), which promotes its credentials for of “clean energy” while owning shares in the fossil fuel companies Woodside and Santos. .



Read more: Super funds are feeling the financial heat of climate change


So how can you check what your superannuation fund is investing in?

Super funds are legally required to disclose how they invest your money in two different disclosure documents – a product disclosure statement and a portfolio disclosure.

Both will be available on a super fund’s website, but the ease with which you can find them will vary.

The rest of this article is going to explain what information these documents provide, how useful this information is likely to be, and your best bet to ensure your super fund reflects your values.

The product disclosure statement

Product disclosure statements are required by the financial regulator (the Australian Securities and Investments Commission) for all financial products.

This document presents the most basic but important information about the features, benefits, risks and costs of an investment product, including fees and taxes. The format is standardized, with a section (Section 5) on “How we invest your money”.

The information it contains is extensive. At best, you’ll learn how the fund allocates its investments between safe and riskier assets, and between different asset classes – Australian equities, international equities, property trusts, infrastructure trusts, cash, and more.


Examples of “how we invest your money” sections in REST and HESTA super fund product disclosure statements.
REST; HESTACC BY

Disclosure of portfolio holdings

For a complete overview of where your money is invested, you can view the Portfolio Holdings Disclosure.

This document lists the complete holdings of a fund, including the percentage and value of each company share held.

Disclosure of portfolio holdings is relatively new, only being mandatory since March 2022 under legislation aimed at improving transparency in the sector.

However, superfunds are not obligated to provide this information in a consistent and easily understandable manner.

For a non-expert who doesn’t know what to look for, the level of detail can be mind-boggling. You may find yourself poring over a spreadsheet with thousands of items.

The Australian Retirement Trust’s Portfolio Holdings Disclosure for its Lifecycle Balanced Pool, for example, has over 8,000 positions.


A fragment of the portfolio holdings information for the Lifecycle Balanced Pool fund.
Australian Retirement Trust, CC BY

Some super funds have made the effort to provide this information in a more user-friendly format. One example is Future Super, which lets you search and filter portfolio holdings by asset class and country of origin.

But if your concern is to avoid investing in a specific activity such as fossil fuel mining or gambling, you will need to know the businesses and other assets you want to avoid for this to be useful.



Read more: Vital signs: No, we won’t change the corporate world with divestitures and boycotts


Your best options

This is not to say that portfolio disclosure requirements are useless. They are incredibly useful – a huge leap forward in sector accountability. They are simply not designed for consumers.

So much remains to be done to make the sector truly transparent.

What would really help is independent certification and ratings of great products, similar to websites and government programs that certify energy efficiency and allow comparison of electrical plans.

In the meantime, I can offer you a big tip.

Choose a specific retirement product that markets itself on its environmental or social sustainability credentials. Most super funds now offer these choices alongside their more traditional investment options.

There are a variety of “screening” approaches to ethical investing. Some exclude entire sectors. Others include the best environmental and social performance, even among “sinful” industries such as tobacco or weapons.



Read more: Sustainable investing: is it worth the hype? Here’s what you need to know


So just because a great product is marketed as “ethical” or “sustainable” doesn’t mean you’ll be okay with all of its investments.

But there is a much higher likelihood that it will live up to its claims due to greater scrutiny by third parties such as environmental groups as well as the financial regulator.

The Australian Securities and Investments Commission warned super funds earlier this year with a “guidance note” on the growing risk of greenwashing in sustainability-related financial products.

He reminded the funds that “making false or misleading statements (or dissemination of information), or engaging in dishonest, deceptive or misleading behavior in connection with any financial product or service” is against the law.

The super funds therefore know that their portfolios are under scrutiny.

Changing investment options or funds is easier than you think. All you have to do is fill out and submit a form. Just be sure to compare fees and performance, and get a second opinion from a reputable advisor before “voting with your wallet”.