A few people have asked me lately about how they can use their money to combat climate change. Our investments, including superannuation can be a powerful tool to deal with climate change.
However, many superannuation funds are financing fossil fuels and all the bad stuff for our future.
It’s crazy. We create a superannuation to save for our future. But in a cruel plot twist, that money is destroying the very future we were wanting to live in. Now that is a post apocalyptic movie waiting to happen…
Some big dogs are moving…
It’s not all doom and gloom in the investment world though. Larry Fink is the CEO of BlackRock, the world’s largest asset management firm. They are responsible for about $7 trillion in funds under management. Yep, that is an ‘illion’ with a Tr.
Each year he writes an open letter to the CEOs discussing trends and offering an investor’s perspective. Over the past few years, Larry began to discuss the concept of purpose led businesses. He contended that purpose led businesses are more profitable in the long term because they are focused on social and environmental outcomes, not just profit. This shift in thinking is changing the investment focus around the world.
They are creating new funds and investment options that don’t just screen out negative investments (like weapons of mass destruction, tobacco, fossil fuels and guns), but actively invest in renewables and climate positive companies.
But we need more action.
“We need $90 trillion over the next 10 years to achieve the goals of the Paris Agreement and the 2030 Agenda for Sustainable Development. Yet fossil fuels still attract nearly three times more subsidies than climate solutions,” writes Morgan, Executive Director at Greenpeace (on World Economic Forum website).
So let’s tackle climate issues with our dollars. Even if we don’t have trillions of dollars like some of the big dogs out there, we can still have an impact. One way is to move investments including superannuation and savings into accounts that don’t invest in fossil fuels.
So what do I do?
Disclaimer, I am not a financial advisor. These are just some tips and ideas to get you thinking about the impact of your superannuation.
It is hard to know where to start with money at the best of times. Superannuation is a weird beast because it is such a passive part of our lives. I mean, how many of us actively look at our superannuation balances? That money is just hidden away, charging us some wicked fees. Most of the time we don’t even know much superannuation we have or where the money is being invested.
Below are some helpful resources I have found along the way:
- Market Forces: Market Forces are an awesome advocacy organisation. They put pressure on financial institutions financing environmentally destructive projects. They also make information including businesses who are supporting Adani and how to pressure those businesses to cut ties with the mine.
- 1 Million Women: This crew always make things easy to understand. The article is practical, informative and also defines terms like negative screening.
- Responsible Investment Association of Australia: For all you nerds out there who want benchmark reports and fact sheets, this is the website for you. RIAA offer a deeper understanding of what it means to be a responsible investor. They discuss the spectrum of investment options and how they compare.
- ASIC’s Money Smart: This ripper of a website is a little Aus Government invention and has some 101 superannuation basics.
- The Finance Innovation Lab: This is a Planet B Insights throwback to the time I interviewed Lydia Hascott about her role in making the financial system work for people and planet. Inspiring stuff!
Ultimately, the decision must come down to a combination of the:
- risk you’re willing to take
- mix of investments you want to make
- amount of fees you want to pay
There are probably some other things as well because let’s be honest… Business is risky.
What I do know is that fees are really important. Even 0.1% difference in fees can have a compounding difference of tens of thousands of dollars. ASIC’s Smart Money website says that when you look at fees, the lower the better. I cannot and will not argue with that logic. This is especially important for women who on average end up with significantly less superannuation than men. Make sure you look into the wild world of fees and consolidate your super if you haven’t already. Check out ASIC’s Money Smart article about consolidating your superannuation here.
Grab a few mates together and have a bit of a chat about superannuation. A few people I have spoken to love Australian Ethical and Future Super. I am with Australian Super’s ethical balanced portfolio. Start a conversation, have a read and make a decision that is good for your bank account and your future!