Is Your Super Fund Sustainable?

Part 2: Taking Control – Ethical Options, Switching Steps, and Why It Pays Off

In Part 1 of this series, we looked at how superannuation works, where Australia’s retirement savings are invested, and why those investments matter. For many Australians, the discovery that their super fund is investing in fossil fuels, weapons, or tobacco is a confronting one. But once you’ve seen the problem, the natural next question is: what can I do about it?

The good news is: you have more control than you might think. Whether you’re with a major industry fund, a corporate plan, or a niche ethical fund, your super is ultimately your money. And that means you can direct how it’s invested.

The first decision you’ll need to make is whether to stick with your current fund and switch to one of its sustainable investment options, or whether to move to a dedicated ethical super fund. Each approach has pros and cons, and the best fit depends on your values, preferences, and financial goals.

Let’s start with the dedicated ethical funds. These include providers like Australian Ethical, Future Super, Verve Super, and others. What makes these funds different is that their entire investment philosophy is built around sustainability and ethics. They apply strict exclusion screens – typically ruling out fossil fuels, gambling, tobacco, weapons, and animal cruelty – and proactively invest in sectors like clean energy, sustainable infrastructure, healthcare, and education. Many of them also publish their full holdings and provide detailed impact reports, so you can see exactly where your money is going. These funds tend to attract members who want full alignment between their retirement savings and their personal values.

By contrast, most mainstream super funds – including AustralianSuper, UniSuper, Aware Super, HESTA, and others – now offer what are often labelled “sustainable,” “ethical,” or “socially aware” investment options. These portfolios typically apply some ESG (environmental, social, and governance) screening, and may exclude a handful of industries (e.g., thermal coal or controversial weapons), or tilt the portfolio towards companies with better ESG scores. Some also invest directly in climate solutions or social impact projects. However, the strength and transparency of these options vary. Several funds have faced criticism for greenwashing – offering “ethical” options that still contain fossil fuel companies or defense contractors in small but notable amounts.

If complete exclusion is important to you, a dedicated ethical fund may be the better choice. But if you value being part of a large, well-resourced fund with strong performance, insurance coverage, and employer integration, a high-quality sustainable option from a mainstream fund can also be a meaningful step forward. In fact, many mainstream funds have made real progress: several were named Responsible Super Fund Leaders in the Responsible Investment Association Australasia’s (RIAA) 2023 benchmark report, including AustralianSuper, Aware Super, UniSuper, HESTA, and CareSuper.

So how do you make the switch?

There are two main routes: you can switch investment options within your current fund, or you can switch super funds entirely.

Switching within your fund is usually straightforward. Most super providers let you change your investment option online, and the process is completed in a few clicks. You’ll need to review the Product Disclosure Statement (PDS) for the sustainable option to understand what’s excluded or included. Once you switch, both your existing balance and your future contributions can be directed into the new option.

If your fund doesn’t offer an option that aligns with your values, switching to a new super fund is also relatively simple. You start by selecting a fund – for example, Australian Ethical or Future Super – and signing up on their website. Once you’ve joined, you can either roll over your existing balance manually (using your myGov account or a paper form), or let the new fund initiate the transfer on your behalf. Finally, you’ll need to give your employer the details of your new fund so that your compulsory contributions go to the right place.

The key thing to check before switching is whether you have any insurance attached to your current fund. Many people have default life or income protection cover as part of their super, and switching funds could result in that cover being cancelled. Make sure your new fund offers the insurance you need, or consider arranging cover separately before making the move.

Of course, people often ask: is sustainable super financially risky? Does investing ethically mean sacrificing returns?

The evidence increasingly says no. RIAA’s 2023 report found that super funds with strong responsible investment practices outperformed their peers on average across 1-, 3-, and 5-year periods. Ethical funds like Australian Ethical and Future Super have ranked competitively on returns, and some mainstream ESG options have also delivered strong performance. For example, UniSuper’s Global Environmental Opportunities option and AustralianSuper’s Socially Aware option have both been among top performers in their categories.

Beyond historical performance, there’s a growing recognition that ethical investing reduces exposure to long-term risk. Fossil fuel companies, for instance, face regulatory pressure, changing consumer demand, and stranded asset risk. Climate-related financial risk is now widely acknowledged by central banks, insurers, and investors. Funds with high fossil fuel exposure may find themselves vulnerable as the global economy transitions to net-zero emissions.

Ethical portfolios also tend to have lower carbon intensity – meaning fewer emissions per dollar invested – which translates to lower risk in a decarbonising world.

Figure 1: Estimated Carbon Intensity by Super Fund Type (2023)

Illustrative comparison based on relative carbon exposure of fund categories. Figures are derived from RIAA’s 2023 Responsible Super Fund Benchmark, which found that ethical super funds have on average ~79% lower carbon intensity than non-certified peers, and Responsible Super Fund Leaders have ~60% lower carbon intensity..

This isn’t just about ethics. It’s about future-proofing your retirement savings. When you choose sustainable super, you’re not only aligning your investments with your values — you’re also positioning yourself to benefit from the growing demand for cleaner, more resilient, and more responsible business practices.

And there’s another benefit: confidence. When your money is working in service of the world you want to live in, rather than against it, it can change the way you feel about saving and investing. You’re no longer passive — you’re participating.

Finally, remember that your voice matters. Even if you don’t switch funds, you can still contact your super provider to ask for greater transparency, stronger exclusions, or more climate action. Funds take member feedback seriously, and campaigns led by everyday Australians have already pushed several major funds to divest from coal or set net-zero targets.

In summary: your super is one of the most powerful tools you have to influence the future. Whether you choose an ethical fund, a greener investment option, or simply ask your fund to do better — you're making a difference. Not just for yourself, but for everyone.

And that’s a future worth investing in.

Sources:

• Understanding how super investments work

• Money invested in fossil fuels vs renewables (Market Forces & ABC analysis)

• Examples of super fund investments in controversial industries

• Member pressure and industry shifts toward sustainability

• Tools for checking super fund sustainability (Market Forces, RIAA)

• Ethical vs mainstream fund comparisons

• Switching super steps and tips

• Performance and risk outcomes of responsible investments