Samantha Donovan: The country’s biggest super fund is planning a shake-up of its responsible investment policies after an ABC investigation into its holdings in weapons companies. It’s revealed Australian Super’s so-called Socially Aware option has more than $20 million of customers’ retirement savings invested in companies making nuclear weapons. And it’s not the only fund investing in weapons manufacturing under what’s promoted as an ethical brand option. Pat McGrath is with the ABC’s Investigations Unit. So Pat, what is Australian Super intending to do after your investigation?
Pat McGrath: So Australian Super’s announced that it’s going to be making changes to its Socially Aware branded option. It’s going to be telling members about some changes to its policies. That comes after we’ve revealed that it has about $26 million invested in nuclear weapons companies. And this is the Socially Aware option, which makes clear it doesn’t invest in certain types of weapons, but it’s going to extend that to nuclear weapons now, which many other funds apply that exclusion. But Australian Super seems to be changing its policies today.
Samantha Donovan: And you’ve discovered that Australian Super isn’t the only so-called ethical fund investing in weapons that its investors may not be aware of. What else has your investigation found?
Pat McGrath: Yeah, so we looked at any Australian super fund which offers an ethical or sustainable option. And we found that across these funds, there’s about $27 million invested in weapons such as nuclear weapons, white phosphorus bombs and depleted uranium weapons. And there are some cases where companies that are in these portfolios do seem to contradict the policies of these funds. But in many cases, it seems like the reason why these holdings are in these funds is that there’s some quite loose language. There’s no clear definition of exactly what a controversial weapon is. So some funds might say they’ll apply a restriction on controversial weapons, but they will have nuclear weapons, for example, in their portfolio. And others will have a specific exclusion on white phosphorus bombs. So what we’ve found is that there isn’t a consistent definition of what is exactly a controversial weapon. And now these funds are really facing calls to come up with a clear definition of what that is.
Samantha Donovan: So Pat, surely a lot of investors are going to be disappointed to hear these so-called ethical funds are investing in weapons. Does it all get down to money? Is that why the super funds want to hold on to their investments in these companies?
Pat McGrath: Yeah, so if you look at the performance of these companies since the war in Ukraine started and then the latest conflict in Gaza started, the value of these companies and the profits of these companies has been skyrocketing. It’s been a huge boom time as a lot of these companies are benefiting from this inflow of money from governments around the world looking to boost their capacity as the world faces another round of conflict.
Samantha Donovan: And have you had much reaction as yet from people who’ve discovered that their fund, which they thought was an ethical one, is investing in these sorts of weapons?
Pat McGrath: Yeah, I mean, I think a lot of people are very surprised to see that a fund or an option that’s been promoted as ethical or sustainable has these kinds of weapons. This is part of a long-term project that we’ve been looking at where we basically are comparing the promises of these funds with their holdings. And in many cases, it seems like what’s in the fund does contradict what these funds are promising to their members. But the answer does appear to be in the fine print that often there is some pretty broad language that allows these funds to hold on to investments that really would surprise their members.
Samantha Donovan: So how can people check if their so-called socially aware or ethical investment superfund is investing in weapons?
Pat McGrath: Well, thankfully, there is a lot of transparency around this now. I mean, the reason that we’ve been able to do this investigation is that these funds are now required to publish their holdings every six months. So members can get online and download the holdings of all of their super funds and see exactly what they’re invested in. But more simply, they can ask their super fund or they can also look around and look what other super funds do. We haven’t published the names of all the super funds that offer ethical options, but there are some out there that don’t have investments in these industries. So clearly it does pay to shop around.
Samantha Donovan: The ABC’s Pat McGrath and you’ll find more on that special investigation on Australian ethical super funds investing in weapons on the ABC News website.