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You're considering an ethical super fund for a sustainable future. This is a great step towards making a positive impact on the environment and society.
There are many options to choose from, but some of the most popular include Australian Ethical Super, which has been a leader in socially responsible investing for over 25 years.
Ethical super funds often have a strong focus on environmental and social issues, such as climate change and human rights.
Worth a look: Ethical Investing
What Is a Fund?
A fund is a type of investment vehicle that pools money from multiple investors to invest in a variety of assets.
It's essentially a way to diversify your investments by spreading your money across different types of assets, such as stocks, bonds, and property.
Funds can be managed actively or passively, with active funds trying to beat the market and passive funds aiming to track a specific index.
The goal of a fund is to provide investors with a way to invest in a wide range of assets, while also spreading risk and potentially increasing returns.
Investors can choose from a variety of fund types, including equity funds, fixed income funds, and hybrid funds.
Some funds may have a specific investment objective, such as growth or income generation.
For more insights, see: Fundrise Income Fund
Choosing a Super Fund
When choosing an ethical super fund, consider the factors that matter most to you. Info is crucial, so make sure the fund is transparent about its investment strategies and values.
Fees are another important consideration, as you want to ensure your money is working for you, not against you. Look for funds with low fees to maximize your returns.
Here are some key factors to consider when choosing an ethical super fund:
- Info
- Fees
- How we choose
Keep in mind that ethical investing is a personal choice, and what's most important is finding a fund that aligns with your values and beliefs.
How to Compare
To compare super funds, you need to consider several key factors.
Start by looking at the fund's information, including its investment strategy and performance history.
Fees are another crucial aspect to consider. You want to find a fund with low fees to maximize your returns.
You should also consider how the fund chooses its investments, as this can impact its performance and alignment with your values.
Should I Invest in a Fund?
You don't have to invest in a fund - the decision is completely up to you.
The basic premise behind ethical investing is that you put your money where your mouth is to support the causes and companies that match your values and beliefs.
You can make a personal impact by choosing a fund that aligns with your values, for example, if you're passionate about climate change.
If you're passionate about a particular cause, making sure your super isn't helping fund the opposite is one way you can make a difference.
Ultimately, the decision to invest in a fund is a personal one, and it's essential to consider what matters most to you.
Investment Options
Ethical super funds offer a range of investment options to suit different needs and goals.
Australian Ethical Super Balanced is a notable option, certified as sustainable by the Responsible Investment Association Australasia and a winner of the Finder Green Awards in 2020, 2021, 2022, and 2023.
A unique perspective: Tata Ethical Fund
You can choose from a variety of superannuation and pension options, as well as managed funds, an SMA, and an ETF product.
Some of the key features of Australian Ethical's investment options include:
- Certified sustainable
- Investment transparency
- Climate change awareness
Their investment process involves ethical assessment, investment analysis and construction, and ethical stewardship, which includes monitoring investee companies and engaging with them to influence positive change.
Consider reading: Sheepskin Rugs Ethical
What to Invest In?
If you're looking to make a positive impact with your investments, there are some great options to consider. Renewable energy projects like wind farms are a great place to start.
These projects are not only good for the environment, but they can also provide a steady stream of income through the sale of renewable energy credits. Renewable, clean energy projects like wind farms can be a great investment opportunity.
Some super funds also invest in companies that do not test on animals, which is a great option for those who care about animal welfare. Recycling and waste management is another area where you can make a positive impact.
Intriguing read: Top-rated Impact Investing Platforms
Investing in clean, efficient transport like electric cars can also be a good choice. Healthcare and education are also important areas where you can make a difference.
Here are some specific investment options to consider:
- Renewable energy projects (like wind farms)
- Companies that do not test on animals
- Recycling and waste management
- Clean, efficient transport (like electric cars)
- Healthcare and education
- Innovative technology and sustainable products and manufacturing
Performance
Performance is a crucial aspect to consider when evaluating investment options. Past performance does not indicate future performance, but checking a super fund's investment performance can give you an idea of the returns it has generated over the long term.
Checking a super fund's investment performance over 10+ years can be a good starting point. This can help you gauge the fund's ability to generate returns over time.
A fund's investment performance is not a guarantee of future success, but it can give you a sense of its potential.
Products and Services
Australian Ethical is a pure-play ethical investment manager that offers a range of products and services to its members and clients. They provide thirteen superannuation and pension options, as well as twelve managed funds options, an SMA and an ETF product.
Their investment approach aims to give investors access to ethically screened portfolios of companies and other investments that are more aligned with their values than market portfolios. Australian Ethical's investment process involves an ethical assessment, investment analysis and construction, and ethical stewardship.
Here are some of the products and services offered by Australian Ethical:
- Superannuation and pension options
- Managed funds options
- SMA (Separately Managed Account)
- ETF (Exchange-Traded Fund) product
Their investment strategy results in equity and multi-asset funds that are overweight in renewables, technology, and healthcare. This means they invest more in these sectors than the benchmark, with an average of 4.1x more investment in renewable energy than the benchmark.
Fees and Charges
Some ethical super funds can charge quite high fees, in comparison to regular MySuper funds. A general rule of thumb is to aim for annual fees that are around 1% of your balance or less.
Fees vary between funds, but ethical super funds do tend to charge slightly higher fees than some default MySuper funds offered by retail and industry funds.
You may find that a relatively new ethical super fund charges higher fees than one that has been established for a longer period of time. This is because an increase in the number of members may allow a fund to lower its investment fees.
Charged Fees
Ethical super funds can charge high fees, sometimes as high as 1% of your balance or more, but it's worth comparing fees among different funds to find the best option for you.
Some ethical super funds charge slightly higher fees than default MySuper funds offered by retail and industry funds due to the comprehensive research that goes into each investment.
A general rule of thumb is to aim for annual fees that are around 1% of your balance or less.
Relatively new ethical super funds may charge higher fees than established funds because they haven't yet reached the same level of economies of scale.
Actively-managed retail funds can charge even higher fees than some ethical super funds, so it's essential to compare fees carefully.
It's worth noting that as an ethical super fund grows in membership, it may be able to lower its investment fees over time.
Beware of Greenwashing
Greenwashing is a real concern when it comes to super funds. Some super funds may claim to be environmentally friendly, but in reality, they're investing in fossil fuels.
Consumers should ask their super fund how much money is invested in fossil fuels versus renewable energy. Make sure your fund discloses its investments.
Many super funds are investing in harmful industries like fossil fuels and members don't know that. If your super fund has a plan to cut fossil fuels by 2050, question them why not earlier.
Individuals have a huge amount of power in their super and can use it to push for change.
Frequently Asked Questions
What are the best performing ethical funds?
For investors seeking top-performing ethical funds, consider the JPM Global Research Enhanced Index Equity (ESG) UCITS ETF and the Rathbone Ethical Bond Fund, which have demonstrated strong returns while aligning with socially responsible investment goals.
Are ethical funds a good investment?
Research suggests that ethical funds can deliver competitive returns, even outperforming traditional portfolios in some cases. Explore the benefits of investing in a way that aligns with your values
What is an example of an ethical fund?
An ethical fund is a type of investment fund that screens out companies involved in activities like alcohol production or arms manufacturing. This fund prioritizes socially responsible investments that align with its moral values.
Sources
- https://www.finder.com.au/super-funds/ethical-super-funds
- https://www.workforclimate.org/post/switching-ethical-super-fund
- https://www.workforclimate.org/post/default-ethical-superannuation
- https://en.wikipedia.org/wiki/Australian_Ethical_Investment
- https://www.smh.com.au/money/investing/ethical-super-doing-good-and-performing-better-than-standard-funds-20230509-p5d6xb.html
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