Tom Swann, a researcher at the Australia Institute, says anyone exposed to the fossil fuel energy sector has lost money in the past three years

This article is more than 4 years old

This article is more than 4 years old

Investment in fossil fuels is dragging down the returns of Australians’ superannuation, with funds that limit or exclude fossil fuels performing above average in 2015.

Balanced investment funds are estimated to have returned about 5.7% on average in the 2015 calendar year, according to preliminary analysis by Chant West, a superannuation research firm. But Future Super, which avoids any investment in fossil fuels, returned 7.04% in its balanced investment option, new figures reveal.

The managing director of Future Super, Simon Sheikh, said the results showed avoiding investment in fossil fuels was a responsible financial move, not a purely ethical or environmental one.

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“Fossil fuel-free investment strategies continue to prove themselves as the responsible investment strategy to protect and grow members retirement savings,” he said.

Australian Ethical, which also limits its investment in fossil fuels, also performed above average, with its balanced investment option returning 6.5% in the 2015 calendar year.

The Thomson Reuters/Future Super Australia Fossil Free Index, a tool created to compare fossil fuel-free investment strategies with the broader sharemarket, appears to show fossil-free investment strategies returned 4.96% in 2015 while the broader sharemarket returned only 2.12%.

Tom Swann, a researcher at the Australia Institute, said anyone who had remained exposed to the fossil fuel energy sector had lost money in the past three years.

“A lot of the large funds are doing next to nothing and that’s just not doing their job properly,” he said. “That’s putting people’s retirements at risk.”

Swann pointed to recent research showing the Bill and Melinda Gates Foundation would have been billions of dollars better off if it had divested from fossil fuels. And in the UK, pension and hedge funds were also shown to have been better off between 2010 and 2015 if they dumped holdings in fossil fuel companies.

This year was unlikely to be any better for the fossil fuel industry, Swann said. Oversupply in the market and decreasing demand from China would bring down the value of fossil fuel energy companies.

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Swann said there were two things fund managers could do to look after their customers’ retirements – dump investment in fossil fuels or try to change fossil fuel companies’ behaviour.

“But most are doing nothing and assuming it will all be good,” he said.

Mano Mohankumar, an investment research manager at Chant West, said a big factor driving the difference between funds was how much they invested in foreign currency. Since the Australian dollar dropped in 2015, funds that invested in foreign currency had performed better.

But Sheikh said Future Super was currently invested 100% in Australian assets. .

“Future Super’s outperformance comes in spite of not benefiting from the depreciation of the Australian dollar against the US dollar as we do not have investments in overseas assets that aren’t co-listed on the Australian Stock Exchange,” he said.

“While past performance is not always indicative of future returns, we see long-term risks for the fossil fuel industry.”