In the fifth episode of our Ask The Experts series, Glen sits down with Adam Verwey, Co-Founder and Managing Director of Future Super (Australia’s first 100% fossil fuel-free super fund) to discuss all things ethical investing.
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Adam has a long history in ethical investments, currenting working as the Managing Director of the Future Super Group (the investment manager for Future Super, Cruelty Free Super and Verve Super), responsible for investment management, impact and advocacy for over $1 billion in super funds.
Adam is also Director at the Australasian Centre for Corporate Responsibility, an organisation helping to engage and advocate for ethical decision-making with companies and stakeholders. Plus, he is the portfolio manager for the Thomas Reuters Australian Fossil Fuel Free Index and a member of the Responsible Investment Committee for the Betashares sustainability ETFs.
In this conversation, Glen and Adam cover off on a range of topics including how Adam got started in ethical investing, how he chooses which companies to invest in, the current conversation around ethical investing and the impact of ethical investing on performance.
Adam’s insights on ethical investing
We kicked off our conversation with Adam by finding out a bit about why he got started in ethical investing. “I went to high school in Broken Hill, and there is a mine founded and operated by BHP in the middle of town, right in the main street. It’s a lead and zinc mine, and this lead was poising children in my town and it has serious consequences (such as learning difficulties etc.),” Adam explains.
“During my time at university I helped to change where the student union’s money was invested and switched them to an ethical fund. And that got me thinking: I wonder where my super is invested? I checked my super fund and realised it was predominately invested in BHP.”
That decision to make a personal change to his investments was what sparked Adam’s interest and passion for ethical investing. “Over the last decade, I’ve seen the power we can all have when we take collective action around something like our investments. We have the power to create a world we are proud of. So that is what motivates me, seeing the impact of when we all work together to use our values to shift where our money is invested,” tells Adam.
And it is a logical place for all of us to start, as Adam explains, “we’re all mandated to invest, so we might as well be invested in companies and assets that align with our values.”
As the Managing Director at the Future Super Group, Adam helps to shape the companies included in the group’s super fund portfolios. When vetting companies, he considers the shared values of the group and screens out companies that don’t align with these values.
“One of the areas where Future Super is a bit different is around screening out the Big Four banks. Banking in itself is not evil, it’s just how they operate as a bank that is good or bad. We screen those banks out because they are heavy funders of fossil fuels and other things like nuclear weapons,” Adam tells.
And there’s other less obvious companies that don’t make the cut. “We’ve screened out Woolworths, in part because they are the largest owner of poker machines in Australia (through their hotels and pub holdings).”
“Another interesting company is Tesla, a company that creates a lot of electric vehicles as well as solar and battery technology. They’re also disruptive and can potentially help provide the technology the world needs to create a livable planet. But at the same time, Tesla treat their staff terribly. For example, during COVID Tesla demanded their staff attend workplaces which were unsafe and there were elevated levels of COVID spreading throughout their warehouses,” reveals Adam.
“A lot of the ethical screening work we do is pretty straightforward, but there is an element of grey area for certain companies (like Tesla) that aren’t as clear,” tells Adam.
Our top takeaway points
We discussed a bunch of Adam’s insights into ethical investing. So here are the top takeaway points we learned during this session:
- Collective action can spark meaningful change: If 7.7% of Australia’s superannuation money was invested in renewable energy or related industries than we could power a 100% clean energy grid in Australia by the end of 2030. Your choices can have tangible, real-world impacts.
- Investing ethically doesn’t mean sacrificing performance: Ethical funds in each asset class have slightly outperformed funds in the same asset class (but not by much). So usually, you can expect the return from an ethical fund to be similar to a non-ethical fund.
- Ethical investments are well-placed to whether turbulent market conditions: The funds that are doing the best now are those that completely exclude fossil fuels. So, the biggest factor in determining whether your super fund got a positive or negative return over the last financial year was whether your funds invested in fossil fuels.
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