Add Category
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.
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.
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).
ASIC has been leading a crackdown on investment funds misleading customers about the sustainability of their investments and has won court cases against Active Super and Vanguard in the past year.
It told Mr Bourne in July 2022 that it would look into the matter and had escalated his complaint to a specialist team. But he heard nothing for more than two years, until the ABC asked ASIC about the status of the case.
ASIC deputy chair Sarah Court said the regulator raised concerns with AustralianSuper about the wording of its policies but did not find evidence to prove in court that the fund was misleading its members.
"We think these statements on AustralianSuper's website go pretty close to crossing a line for investors," she said.
"On this occasion, we found it didn't cross that line into being misleading."
Ms Court has warned super funds they need to be "very careful in how tricky they are with explaining where money and funds are being invested".
"Many investors are not going to understand the difference between securities and other kinds of assets. They have to be very clear and up-front about that."
Staff from ASIC have since called Mr Bourne and apologised for not updating him on the outcome of its investigation.
"I gratefully accepted that," he said.
AustralianSuper says it has since ended its investment in Adaro, but it is still lending members' money to Baytex, Magnolia Oil and Gas and other fossil fuel companies.
AustralianSuper is planning to announce changes to its investment policies in the Socially Aware option following an ABC investigation showing it has held more than $26 million worth of shares in companies involved in nuclear weapons.
It is one of the only major super funds that does not apply an exclusion on nuclear weapons in its Socially Aware option.
Mr Bourne says he wants the fund to broaden the option's exclusions on other industries, including fossil fuels.
It currently only excludes investments in shares and bonds of companies that directly own fossil fuel reserves.
That means it is free to invest in companies involved in oil and gas pipelines, petrol retailers and distributors, fossil-fuelled power generation and oil and gas exploration.
Its latest financial disclosures, which list its holdings as at the end of December, show it has invested members' savings in the shares of petrol retailer and distributor Ampol and Perth-based Mineral Resources — which is currently developing the Lockyer gas project near Geraldton in Western Australia.