At a moment when we’re hearing more and more about the impacts of climate change, plenty of people are wondering how they can align their investments with their personal beliefs.
So what exactly makes an investment ‘socially responsible’?
‘Social responsibility’ is the idea that businesses should focus on – that we should have a positive impact on society as well. In investing terms, this means choosing to back businesses that create long term value, look after the planet’s natural resources, and help, not harm, the local and global community.
At First State Super, members can choose to put their super (or part of it) into one of two pre-mixed socially responsible investment funds in addition to or instead of our existing pre-mixed options. Here’s how we choose which investments to include for our SRI options – and which ones to avoid.
Step one – avoiding the bad guys
First of all, creating a socially responsible fund means knowing which investments to avoid. Perhaps not surprisingly, companies that generate more than the majority of their revenue from fossil fuels are automatically excluded. We also steer clear of the usual suspects – companies in the tobacco, gambling or pornography sectors – plus those linked with nuclear power, inhumane animal testing and logging of old growth forests.
Step two - finding the good guys
The second step is known as ‘positive screening,’ and to put it simply, that means identifying investments that get a gold star in the social stakes.
These are companies that operate ethically, with good working conditions, positive social initiatives, responsible environmental practices (like energy efficiency and sustainable product lifecycles), and good corporate governance. Of course, none of these attributes are enough on their own. In addition, the investments need to generate a good financial return – in fact, we think companies that take a sustainable approach will actually perform better in the long-term. What’s good for society as a whole is also good for our members’ balances, and vice versa.
Step three – encouraging everyone else
It’s not just a matter of choosing which investments are in and which are out. At First State Super, we see it as our responsibility to keep talking to all the companies we invest in, and encourage ongoing performance in the social responsibility stakes.
We work with to start a conversation with the companies – not just those included in our designated socially responsible funds – on topics such as climate change, sustainability and energy usage, corporate culture and workplace safety. Because as a large investor, we’ve got enough power to make a real impact – and in turn, that means our members do too.
So if you’re concerned about the planet don’t feel frustrated. You – and your super - are more powerful than you think.