Under the Stronger Super regime, superannuation funds will be required to disclose the details of their underlying investments every six months from 1 July 2014.
Speaking at an Australian Institute of Superannuation Trustees (AIST) event last week, Towers Watson director of investment services Graeme Miller said the requirement for superannuation funds to disclose every individual holding would end up forcing trustees to justify every investment decision they made.
Lobby groups and special interest groups could potentially “trawl through” a superannuation fund’s assets and force trustees to justify their investment choices, said Mr Miller.
But Australian Ethical chief investment officer David Macri said it would be a “positive” if superannuation funds were required to justify their investment decisions.
He said that it would be good for the industry as a whole if superannuation funds were “forced” to place ethical issues “front of mind”.
Furthermore, it is irrelevant who poses these kinds of questions to superannuation funds, Mr Macri added.
“These things should be considered – and it’s not just ethical fund managers who should be thinking about it,” he said.
Mr Macri said he did feel some sympathy for superannuation funds, since they do not invest in assets directly.
“But I think they do need to be clear on their position on controversial issues. They probably need to consider their investments in coal, for example, and coal-seam gas,” he said.
Considering that more and more superannuation funds are becoming signatories to the United Nations Principles of Responsible Investment (UNPRI), they should have environmental, social and governance (ESG) considerations built into their processes already, said Mr Macri.
He played down the notion that superannuation funds would face increased costs as a result of the need to “justify” their holdings.
“They may need someone to answer the phones and answer the queries … [but] they should be able to deal with this pretty cost-effectively,” said Mr Macri.
Australian Ethical already discloses the portfolio holdings of its superannuation fund, despite the risk of its ethical screening intellectual property being “stolen”, said Mr Macri.
