The phrase to ‘put your money where your mouth is’ has taken on a whole new meaning in today’s socially-conscious world.
Amid the political turbulence that has plagued Australia in recent years, the largest influence we arguably have on society is no longer who we vote into power, but how and where we spend our money. And this form of transactional social activism is not only increasing, but spreading into areas beyond our daily spend.
Investing in social change
As per the economic model of supply and demand, consumers now realise the enormity of their influence; where they can exercise control over companies’ success (or otherwise) pursuant to their impact on society. A 2018 Accenture study showed that two-thirds (63%) of global consumers prefer to purchase products and services from companies which reflect their own values and beliefs, with almost half (47%) of respondents ceasing to spend with a company due to brand disappointment.
Investors are also cashing in on this trend and realising the potential to achieve both financial and social returns by investing with companies that are practising shared value. In 2017, responsible investments constituted more than half (56%) of all assets professionally managed in Australia, with the market quadrupling to $5.8 billion from 2015, according to the Responsible Investment Benchmark Report.
This number is set to grow, with Australia being one of 16 countries to recently join the Global Steering Group for Impact Investing, which focuses on increasing impact investing – defined as investment that targets social or environmental outcomes – to become at least 10% of assets under management around the world.
The opportunity for superannuation
Given that shared value projects and initiatives are fundamentally long-term strategies, using superannuation capital to create sustainable social progress is a natural fit.
Globally, superannuation (or pension) funds make up the single largest consolidation of money in the world. Meanwhile, Australia boasts the fourth largest retirement savings pool, with superannuation assets totalling more than $2.8 trillion at the end of the March 2019 quarter, according to the Association of Superannuation Funds of Australia (ASFA).
As such, our collective superannuation funds provide an immense resource through which we can steer positive change; by investing in forward-thinking shared value companies and projects. In fact, research conducted by the UTS Institute of Sustainable Futures (ISF) and ‘fossil free’ superannuation fund Future Super in 2018 proposed that by using less than 8% of the savings in our national superannuation pool, Australia could fund the investment needed to reach 100% renewable energy by 2030. In its 2018 investment Impact Report, Future Super went on to claim that investing in fossil-free options would pose a much larger impact on climate change than many common lifestyle changes – reducing up to four times the emissions as going car-free; and delivering up to 13 times the impact of switching to a meat-free diet.
And this opportunity is not lost on the vast majority. The Super Fund Responsible Investment Report 2018 shows a clear demand for socially-conscious and sustainable investment channels, with 81% of super funds expressing a commitment to responsible investment.
Consumers are catching on that when we make contributions to our super with every payslip, we are making critical choices about our future stability; and the stability of our world. Beyond our daily purchases, super is becoming yet another avenue for transactional social activism through which we can raise demand for super funds which prioritise ethical and sustainable investments.
Superannuation as a driver for purpose-led business
The implication is that our super can function as a powerful lever to not only contribute to the simultaneous health and wealth of our nation, but to incentivise purpose-led business more broadly.
In a country where super is compulsory, our superannuation choices are possibly the most efficient and accessible means for the wider public to encourage this shift.
And while the data points to this realisation, each of us would know many for whom super remains an afterthought; a simple tick of the default option on our new employee forms. Conversely, Australians must actively invest in their super investments; realising the opportunity – and perhaps, the responsibility – that comes with the decisions we make around where we invest our retirement savings. If we all made this commitment, there is no telling how large an impact we could make on the causes most material to us; effectively maximising our returns overall.
Securing our financial returns
Importantly, evolving the place of super in accelerating social progress will only serve to strengthen Australians’ financial positions too. That’s because much like how companies can only be as successful as the world in which they operate, our individual prosperity is significantly impacted by our economic, social and ecological surroundings. In other words, by investing in companies which create a more resilient and sustainable world, we can ultimately gain more security over the value of our returns into the future.
Inevitably, this sends a clear message to fund managers that they need to change their approach to attract and retain members. Their conversation with Australian investors needs to evolve from risk to the opportunity that comes with investing in purpose-led business. As Novartis Head of Social Innovation & Strategy, Michael Fuerst, put it at the 2019 Shared Value Summit Asia Pacific: “My advice to asset managers now is not to wait until you’re asked about shared value, but to take responsibility for bringing it into the conversation. No CEO would wait to talk about the P&L.”
Super as a competitive tool for social change
At its core, superannuation is designed to achieve better retirement outcomes, and therefore improved future wellbeing, for Australians. But these upshots are relative to the conditions in which we live – where we can only thrive financially and otherwise within a healthy ecosystem.
That is why we need to start perceiving super as not only a monetary asset; but rather, an unrivalled tool for taking an active role in building a better world through business. The upcoming FEAL (Fund Executives Association Limited) National Conference, aimed at furthering the professional development of superannuation fund executives, will explore the theme ‘Shared Value – What is the societal impact of super?” SVP CEO Helen Steel will be discussing this important topic further as part of a panel discussion at this year’s event in Melbourne on August 8.