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Being a good person can be very expensive
You care about the planet, so you want to invest your superannuation in ethical assets.
There’s just one potential problem – your sustainable super fund might be costing you money.
Over the past decade, the average annual return of traditional balanced super funds has been 8.9 per cent, compared to 8.5 per cent for sustainable funds, according to SuperRatings.
| Fund | 10-year return (per annum) |
|---|---|
| SR50 Balanced (60-76) Index | 8.9% |
| Median sustainable balanced option | 8.5% |
What are sustainable funds?
Sustainable funds are those that invest based on environmental, social and governance factors. Each fund has its own criteria about what investments to make; typically, funds will exclude certain types of industry and company, and then remain open to investing in the rest. For example, they might exclude industries like fossil fuels, tobacco and arms, as well as companies with poor records on human rights, the environment and labour practices.
A small difference can make a big difference
While there doesn’t seem to be much difference between 8.9 per cent and 8.5 per cent, it can add up to a lot over the course of a career.
Imagine you worked for 40 years and earned $60,000 every year of your career. That means you’d collect $5,700 of super per year. By the end of your career, you’d have:
| 8.9% annual return | 8.5% annual return | Difference |
|---|---|---|
| $2,047,634 | $1,834,349 | $213,285 |
Money isn’t everything
Past returns, though, are no guarantee of future performance. So sustainable funds might outperform traditional balanced funds in the future.
However, even if traditional funds continue to come out on top, that doesn’t mean sustainable funds are a bad choice.
If you believe that investing ethically is more important than unscrupulously chasing the highest return, then sustainable funds could be a good choice.
Sustainable funds can be strong performers
Another point worth mentioning is that some sustainable funds have outperformed the SR50 Balanced (60-76) Index over the past decade.
So doing the right thing and doing the profitable thing need not be mutually exclusive.
| Top-performing sustainable super funds | 10-year return (per annum) |
|---|---|
| HESTA Eco Pool | 11.1% |
| VicSuper FutureSaver (Socially Conscious) | 10.3% |
| AustralianSuper Socially Aware | 10.0% |
| WA Super (Sustainable Future) | 9.5% |
| UniSuper (Accumulation 1 – Sustainable Balanced) | 9.3% |
| SR50 Balanced (60-76) Index | 8.9% |
| Median sustainable balanced option | 8.5% |
Disclaimer
This article is over two years old, last updated on March 28, 2019. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent superannuation articles.
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Product database updated 26 Nov, 2024
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