Posted: 2024-07-17 18:48:40

In short:

Australia's largest super fund has invested money from its 'Socially Aware' option in the coal, oil and gas industries, despite excluding investments in shares and corporate bonds of companies with fossil fuel reserves.

The Australian Securities and Investments Commission raised concerns with AustralianSuper about the wording of its policies but said it did not find evidence of the fund misleading its members.

What's next?

AustralianSuper is planning to announce changes to its investment policies for its Socially Aware option following an ABC investigation showing it held shares in companies involved in nuclear weapons.

When Paul Bourne signed up to AustralianSuper's Socially Aware option six years ago, he was lured by its promise not to invest in companies that own fossil fuel reserves.

So, he was horrified to learn Australia's biggest super fund had been lending his retirement savings to coal, oil and gas companies around the world thanks to a loophole in its investment policies.

"It looks like greenwashing," he said.

"This fund is trying to appeal to people that want to do the right thing by the planet. This is not good."

While AustralianSuper's Socially Aware option excludes investments in shares and bonds issued by fossil fuel companies, it has no restrictions on other types of assets like property, infrastructure projects and direct loans to businesses.

That means it can enter into private loan agreements with coal, oil and gas companies without technically breaching its own policies or promises to members.

Under these loan agreements, the fund loans its members' savings to companies in return for interest payments that are generally higher than rates offered by other types of fixed interest debt securities like corporate and government bonds.

AustralianSuper's financial disclosures show it has been lending members' funds to fossil fuel companies around the world, including Indonesian coal miner Adaro, Canadian oil and gas company Baytex and US-based Magnolia Oil and Gas.

An aerial view of a large industrial site on the edge of a forest.

Indonesian coal miner Adaro is one of the companies AustralianSuper has invested in via its Socially Aware option.(Adaro Minerals)

In a statement, AustralianSuper said the investments were "consistent with the screens applied to the Socially Aware option at the relevant times".

"Screens are applied to the Australian shares and international shares asset classes and the corporate securities component of the fixed interest asset class of the Socially Aware option.

"Asset classes in the option that are not screened include private equity, infrastructure, property, credit, cash and other assets."

Australian Super said the investments in the fossil fuel companies were all classified as "credit assets", but declined to provide details of the exact type of assets involved.

Its policy documents state that "credit assets" can include "loans, bonds, royalties, leases or other debt securities."

Paul Bourne believes AustralianSuper has misled members about its sustainability credentials.

He is calling on the fund to extend the fossil fuel investment exclusion to all asset types.

"You can take a leadership role here, you can truly offer a good fund," he says.

Mr Bourne complained to AustralianSuper about the holdings when he first discovered them in financial disclosures on the fund's website in 2021.

A man sits on a couch, looking into camera with a serious expression on his face.

Paul Bourne was horrified to learn Australian Super had been lending his retirement savings to coal, oil and gas companies despite being in its Socially Aware investment option.(ABC News: Sissy Reyes)

At the time, he believed the investments may have been in breach of the fund's investment policy because they were not clearly identified as credit assets.

When AustralianSuper responded that the investments were within its guidelines, Mr Bourne took his complaint to the industry regulator, the Australian Securities and Investments Commission (ASIC).

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