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The lazy person’s guide to making a huge impact on climate action

Photography By Cotton Bro
Published 27.04.22

By now, many of us have realised that we should be making all major life decisions with the planet in mind.

It’s not always easy to do though. The truth is, when you’re elbow-deep in life admin and trying to keep things afloat, it can be hard to stay engaged with how your life can make a difference in the huge scheme of things.   

But it can! In fact, you hold so much more power than you probably realise, and that power has real impact on the climate. 

Sometimes these actions require a bit of effort, like test-driving an electric car or getting your house fitted with solar panels. Other times, they can be as simple as sitting on the couch with your laptop doing one (yes, one) really simple task: managing your superannuation. 

Look, we know money isn’t always a sexy topic. And most of us don’t exactly identify as Gordon Gekko Wall Street types. But if you live in Australia and have ever had a job that didn’t pay you under the table, you are an investor through your superannuation fund. And it’s time we talked about how the money we rely on to safeguard our future could also help safeguard the earth’s.  

Remind me, what actually is superannuation?

In some countries, this is known as a pension scheme (the UK and Ireland) or 401(k) plan (the USA). Basically, it’s the money that is saved and invested – either by us or our employer – in order to fund our lives when we retire. 

In Australia and the UK, your employer is legally required to put aside a set amount of money (which is equal to at least 10.5 per cent of your wage in Australia) each pay cycle. This cut goes into a special – some might even say super – nominated account. It isn’t rainy day money; it’s supposed to sit and acquire interest for decades before you access it in retirement.

Over the course of your working lifetime, you will build a pretty impressive stack of cash without really doing anything at all (you know, other than holding down a job and supporting the national economy for the bulk of your adult life). 

Cotton Bro

The power of a quiet investment  

This kind of “out of sight, out of mind” attitude doesn’t always lead to the best results though. It means you’re probably not asking too many questions – say about where your money is being invested – and it also means you’re probably not engaged enough to consider moving your money if you don’t get the answers you want. 

But it’s kind of nuts we don’t think about this more. Even if you’re still in the financial stage of your life where you’re rushing to the pub to catch a half-priced glass of house wine, you probably have more money in your super fund than you realise.  

In Australia, the average 25-year-old’s super balance is said to be somewhere around $24,000. By the time they think about retirement in their 60s, that figure could have swelled to over half a million dollars. Collectively, there is around $3 trillion quietly sitting in Australian super funds. Not only is that money able to buy a lot of (hopefully non-house) wines during your golden years, but it’s also funding huge businesses – which is what we’re really getting at here.  

The businesses superannuation funds have traditionally invested in  

In order to make their members (and themselves) money, traditional super funds invest across a range of industries in companies that are established and seen as low risk. Some of these include the fossil fuel industry, the chemical industry and big pharma. This points to a big problem: maintaining these investments continues the view that they represent sound investments which enables many of them to continue harming the planet. 

While traditional super funds know what they’re contributing to, you might not. In other words, you might not realise that your hard-earned cash is quietly funding huge industries that represent the polar opposite of your values. 

But if 80s movies taught us anything, it’s that money equals power. And while the thought of your cash paying for fossil fuel expansion projects in vulnerable areas is grim, in many countries such as Australia and the UK you have the agency to ensure that your money is being directed towards cleaner investments.  

Fund a green future (without having to really do anything extra)  

The first thing you need to do is check in with your current fund. We’re talking about your hard-earned cash, so you should be doing this anyway.  

Funds have online portals where you check to make sure your employer is making regular payments, and see how the fund is generally performing. They should also provide a breakdown of where they’re focusing their investments. Warning: this can be a stark reality (AKA, all that aforementioned fossil fuel funding).  

If you don’t like what you see, then the good news is the situation can easily be fixed. A growing number of super funds are breaking away by focusing singularly on ethical investing. Making the switch over to one of them is easy: you will just need to fill out a few forms online. Remember, they want your business so will make things as simple as possible for you to make the change.  

Similarly, more traditional funds are now at least offering an ethical investment stream within their larger business model. In those cases, you don’t even actually have to move your cash; it’s just a matter of opting into that ethical stream.  

The power of ethical investing  

In terms of what “ethical investing” actually means, it can take many forms. But generally, these greener funds tend to be more transparent about where your cash ends up. Popular areas of investment include financing renewable energy projects, social housing, healthcare, recycling, public transport, education, sustainable food production, social wellbeing, companies that prioritise gender equity and inclusion, and technologies that support all of the above.  

The impact of that switch offers more than a nice fuzzy feeling. It’s estimated that an average person switching to an ethical fund has almost double the carbon reduction impact of living car-free. In fact, if all of the $3 trillion sitting in Australian super funds was directed towards cleaner investments, the national household carbon footprint would be cut in half. If there’s one point we want to drive home here, it’s this. Think of what could be possible – both for the environment and on a social impact level – if the trillions of dollars currently funding dirty, harmful industries was divested and directed into cleaner and more equitable streams. Every individual would have a better future, because that is ultimately what ethical funds are safeguarding.  

Yaroslav Shuraev

Money still talks  

Let’s also not overlook what a lot of people already know: green investment makes financial sense.  

Multiple reports have shown that, on average, green investments match or outperform traditional funds. As the magazine Money explained earlier this year: “The superannuation funds rated as responsible investors outperformed their peers by 0.87% over one year and 0.56% over 7 years, according to the RIAA’s super report, released at the end of 2021. It mightn’t sound like a lot but because of the long term nature of superannuation, the compounding effect can be significant to retirement savings.”  

You can easily check in on these figures using online tools and guides. Or crunch the numbers yourself (this is your money, so it always pays to really keep an eye on it). Most funds will also provide detailed performance breakdowns on their websites which you can access and compare with other offerings.

Another thing to keep in mind are the projections for some of the industries traditional super funds are continuing to invest in. Analysis by Market Forces found 82 of Australia’s 100 largest superannuation funds “disclose inadequate or no tangible evidence that they have considered the impact of climate risk on their investment portfolios”. Climate-related risks include transition risks (such as those posed by changes in public policy, the disruption to the energy sector from technological change and changes in demand for certain commodities like coal) and physical risks (including the increased frequency and severity of extreme weather events, and the impacts of rising sea levels and sustained warmer temperatures). 

Switching to an ethical superannuation fund: cheat sheet edition  

Let’s recap the simple things you can do next if you want to switch your superannuation to an ethical fund.  

Find your logins  

Get access to your existing super account. You might have it spread across a few accounts so this is a good time to consolidate your cash too.

Check the investments 

As mentioned, most funds offer a breakdown of where they’re putting your money. 

Find an ethical alternative  

If you’re not happy with your current investment, search for an ethical stream or research other funds. Remember to take advantage of those tools and guides to check in on potential fund performance (or do it yourself using data available on their websites).  

Make the switch  

Remember, these funds want your business so they have made the process of changing funds very straightforward and easy. It honestly won’t take you more than 20 minutes.  

Tell your old fund 

Like any healthy breakup, it pays to communicate your reason for leaving your current superannuation fund. They might not change their ways for the overall good of the planet, but they might change for your business. Call them up or send an email explaining what motivated you to move. They need to understand that consumers are powerful and are increasingly voting with their dollars to fund the future they want to see.

This information is general in nature and is not financial or investment advice.  

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