Money Bite-Size Read:
- Many of us are already investors through our retirement funds.
- That money is invested in the market, in different industries and companies.
- Here’s how to ensure your retirement fund helps the planet so that your biggest investment makes the world a better place.
The MoneyBites Take:
Make sure you know where your retirement fund is invested in the market.
Many of us are automatic investors.
We don’t spend much time thinking about retirement funds because you can’t access them until you stop working for good. Retirement decisions aren’t considered a priority in day-to-day life, so we tend to set and forget our fund choices. But where is your retirement money?
Your retirement fund is invested in the market.
That includes being invested in different industries and companies which produce goods and services. Your money should match your values if you want to change the world, including the spending decisions you make and your money in the market.
Here’s how to ensure your retirement fund helps the planet:
1. Know where your retirement fund is
You may have had the paperwork on the retirement fund stashed away somewhere. In order to align your retirement fund with your values, it’s time to sort out your super and know what organisations are managing your retirement fund.
2. Recognise your money is consumer power
We often don’t think about our own money as powerful. We tend to lobby governments on sustainability, but on balance, we have huge collective shareholder power, with our retirement funds representing $2.9 trillion in assets in Australia alone.
3. Every decision you make adds up
Every decision you make with your money puts funds somewhere in the market. For example, research by positive impact investing firms suggests that moving a £100,000 fund from oil and gas companies to a positive impact portfolio equates to taking 5 to 6 cars off the road.
4. Know the ESG principles
If you’re motivated to move to a more ethical retirement fund, your need to know the ESG principles. This is important to know because it shows whether the investment meets environmental, social and governance criteria. You can then use this to help judge whether something is ethical.
5. Beware greenwashing
There’s no industry-wide method for measuring even the ESG principles, and so this is a subjective measurement, left up to the judgement of each investment firm. You need to look under the bonnet to decide whether it’s genuinely an ethical retirement fund or is just greenwashing.
6. We need common sustainability metrics
There are some attempts to promote sustainable investment. However, this relies on funds volunteering to be accredited as an ethical retirement fund. We need to simplify sorting the real impact from greenwashing marketing through a common sustainability metric.
7. Balance principles and performance
The ultimate aim of your retirement fund is to grow over time so that you can use it to stop working when you’re older. When polled, 70% of Australians prioritised maximising returns over having an ethical retirement fund. Make sure your retirement fund fulfils its central purpose by producing returns and balance this with ethical considerations.
Your retirement fund is one of the biggest investments you will hold.
We’re becoming more interested in sustainability and taking responsibility for our actions. So extend those values to your money and look into retirement fund options so that your future fund also funds a more sustainable future.