Is Your Super Funding Big Coal?

After a sharp intake of breath Jenny Curtis goes quiet as she absorbs the list of companies on the screen. In a low voice she says, “I think I’d better write them a letter”.

Curtis, 40-something and a mother of three, pays little attention to her superannuation fund’s mail-outs, but today she’s trying to find out if her money is being invested in the industries she opposes: coal mining and coal seam gas.

“I’m thinking about superannuation more at the moment because it’s in the news,” Curtis tells New Matilda. “I also thought about it last year when Greenpeace ran a campaign about banks that support coal mining.”

According to a recent report by think tank The Australia Institute (TAI), 25 per cent of Australians with super funds share Curtis’s aversion to coal mining and coal seam gas extraction, and would switch superannuation funds to avoid investment in them.

TAI’s report, Time to get engaged with super, states that this could amount to $247 billion dollars being divested.

Community sentiment toward coal seam gas and coal mining is increasingly antagonistic. To illustrate, the expanding Lock the Gate alliance now includes more than 160 local groups opposing “inappropriate mining”, according to its website.

Curtis’s feelings are clear. “I hate coal mining because it’s jeopardising my children’s futures, the planet and all of the systems that we rely upon,” she says. “And coal seam gas is now a new gold rush.”

Curtis’s industry fund, NGS Super, lists the top 10 portfolio holdings on its website. Its largest shareholdings include coal mining giants BHP Billiton and Rio Tinto, as well as colossal coal investors ANZ, Commonwealth Bank, Westpac and National Australia Bank.

“I’d prefer that they invest in renewable energy, and put pressure on the government to make renewable energy investments secure,” says Curtis.

After 22 years of compulsory 9 per cent superannuation savings, Australian funds now manage around $1 trillion dollars of householders’ money (not including self managed funds). It is the world’s fourth largest pool of money.

The Responsible Investment Association of Australia reports that $19.55 billion was responsibly invested in June 2011. So why the huge discrepancy between this and the $247 billion that TAI says may be up for divestment?

For most people, superannuation is one of the largest financial undertakings of their life, after buying a house and paying tax. But many of us have little or no idea where our money is invested. Australian superannuation funds are secretive compared to their OECD counterparts.

In 2009, research agency Morningstar found Australia and New Zealand to be the only countries among 16 OECD nations that do not require regular, full portfolio holdings disclosure by super funds.

New Matilda looked at the disclosure of portfolio holdings of 15 of the largest Australian super funds, and one pure ethical fund. Their various disclosure levels were inconsistent. Some report the top 10 or 20 holdings, and some don’t reveal any holdings; only colourful pie charts showing the approximate proportions of investments in asset classes (bonds, property, shares, international shares etc). The ethical fund revealed the full range of its holdings, updated every six months.

After her initial shock, Curtis wants to know if her savings are invested with coal seam gas companies. But NGS Super does not provide a complete list of the portfolio holdings and she’s left wondering.

“Superannuation is the biggest asset we have, aside from our house,” she says. “It’s all my financial power but I don’t really feel sufficiently knowledgeable about it to make an informed decision.”

Richard Denniss from The Australia Institute tells New Matilda, “The reason it’s hard to find out which funds are investing their members’ money in coal seam gas is that it is hard to find out almost anything about super funds and their investments.”

Superannuation funds operate in an opaque bubble compared to publicly listed companies. They are not required to provide members with audited accounts, or detail what price they buy and sell assets.

Members have no influence over who controls their money and cannot elect managers or trustees. Director profiles are not listed, and nor is director attendance at board meetings, or their remuneration. And members cannot attend an AGM.

Denniss links this lack of disclosure directly to the chronic low member engagement. “The super funds are effectively saying that greater minds than ours [the members]have considered these issues and that they [the trustees and fund managers]should be free to make these decisions on our behalf.”

“If they are sincere about making decisions on our behalf, our trustees should be far more interested in seeking our opinions in determining our values and priorities.”

Fewer than 10 per cent of employees actively choose a fund, according to a 2008 report by The Australia Institute, Choosing not to Choose. Most workers will end up in their default industry fund, and only change when they change jobs.

Curtis thinks her fund should ask for more information from her. “I’d like it if NGS Super sent out a 10 question survey which would help them understand my values.”

Denniss says, “It is certainly easier for the funds with members being so disengaged, because they don’t need to bother seeking our opinions and they don’t have to explain the decisions they make.”

Member apathy is profitable for super funds. A person with $200,000 in super can save $2000 a year in fees, if they switch from a fund charging 2 per cent to a fund charging 1 per cent.

However, Denniss says the real cost is the inability for millions of Australians to exert their financial power and let companies know what they think is right and what they think is wrong.

Julien Vincent from Market Forces (which funded TAI’s survey) believes the collective financial power of mum and dad members who care about where their money is invested is enormous – they just need to be informed.

Market Forces is compiling a record of all super funds’ investment in coal mining and coal seam gas extraction to make that information publicly accessible. “We want to enable people to clean-up their financial environmental footprint,” Vincent tells New Matilda.

But change is afoot.

From October next year, super funds will be required to reveal their complete portfolio holdings twice a year. This about turn came as a result of the 2010 Super System Review. It identified member disengagement and lack of disclosure as big issues, among other things.

When Greg Medcraft, chairman of Australian Securities and Investments Commission, asked his super fund where his money was invested, he was told portfolio holding details were not available to members.

“I don’t think that is good enough,” he said in the Australian Financial Review. “The person who has the most skin in the game is the investor. They should be entitled to see what is in their own underlying fund.”

Pauline Vamos, CEO of the Association of Superannuation Funds of Australia, is broadly welcoming of more transparency of underlying investments but cautious about its implementation.

“If [a member]wants to know more information,” she tells New Matilda, “like whether or not we invest in coal-fired power stations, there should be a requirement to provide the answer, but not necessarily by putting on your website your thousands and thousands of securities.”

“We are trying to negotiate with the regulator in terms of what is going to be the most useful format so that the costs of implementation and upkeeping are not going to be so high as to be a burden on the rest of the members in the fund that aren’t interested in this information.”

A 2009 submission by the Investment and Financial Services Association to the Super System Review states: “The levels of member engagement do not justify provision for active member involvement in the operation of super funds beyond the exercise of individual discretions.” It continues: “Annual general meetings… would not serve any useful purpose and would result in significant annual costs for fund members.”

Denniss concludes, “The super funds are uninterested in letting 13 million Australians know how significant and powerful their collective voice could be.

“If we think executive pay is too high, if we are uncomfortable with corporations making large donations to political parties, or we oppose the way that companies treat some of their workers, then as the ultimate owners of those companies, the superannuates’ voice should not just be loud it should be listened to.”