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How Can you Choose an Ethical Super Fund?

January 31, 2022 | Superannuation

Author: Jon Dickson

It’s essential to carefully think about where you’d want to invest your money. After all, you wouldn’t want your money being used in the wrong ways. This is where an ethical super fund comes into the picture.

An ethical super fund will focus its investments in ethically responsible industries. In an ethical super fund, your money will be invested in companies with ethical practices that consider their impact on society and the environment.

When examining ethical super funds, you’d want to choose one that matches your values and principles. It’s essential to ask these three questions to help you make an informed decision regarding your investment.

Where Will My Money Go?

When you’re investing your hard-earned money, you’d want to know where it’s going and how the fund will use it. Take a look at the fund’s investment portfolio to better understand how the fund will utilize your money.

However, it can be challenging to go through each fund and examine the industries they’re investing in to see if they match up to your values. Luckily, the Responsible Investment Association Australasia (RIAA) offers a responsible returns tool that will help you find the right ethical super funds. This tool will allow you to filter out specific industries you might not want to invest your money in.

Unfortunately, you cannot wholly trust the filters. Some grey areas might still turn up. For example, if a company is not entirely ethical, but only a tiny percentage of its revenue comes from this unethical practice, it might still show up in some funds.

It’s best to narrow down your choices to two or three ethical super funds and thoroughly examine their investment portfolio to weed out any grey areas.

What Is the Fund’s History?

The fund’s history can say a lot about it. Take a look at their performance over the years. This way, you’ll be able to see the long-term relevant figures.

You should also look into the fund’s corporate voting record. How are they voting on ethics-based shareholder proposals? You can read through the Australian Centre for Corporate Responsibility report on this to get an overview of the super fund’s voting record.

How Does the Fund Propose to Drive Change?

When it comes to driving change, funds can take a divestment-based approach, an engagement-focused approach, or both.

In a divestment-based approach, the fund will take away their investments in companies they find unethical. This means continually screening their investments in companies to ensure that their money no longer goes toward corrupt practices. Think of it as weeding the investment garden.

On the other hand, in the engagement-focused approach, the fund will be working alongside contentious companies to enact change. Funds that use this approach believe that they will meet better results by working with these companies to help them move toward a more ethical practice.

Funds can also choose to practice both approaches to drive change. If you’re not comfortable still investing in some contentious companies, then funds that use the engagement-focused method may not be for you. On the other hand, if you strongly believe in the engagement strategy, you might not want to go with funds that only practice the divestment-based approach.

Ready to start investing ethically?

It’s essential to invest your money in industries and companies that align with your values. When choosing an ethical super fund, you must look into where your money will be invested, what the fund’s history has to say about it, and how it proposes to drive change.

For more financial advice, you can count on  Coastal Advice Ballina Byron to assist you in making sound financial decisions. We are a financial adviser based in Byron Bay dedicated to helping you manage your investments and get the lifestyle you deserve. Book a complimentary meeting now!

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