An Interview with Kirstin Hunter, Co-Founder of Future Super

Geoffrey Miller - Science & Technology

In the fight against climate change, the conversation rarely focuses on the way that we invest our retirement savings. Yet, our retirement savings have historically been used to finance energy projects that emit fossil fuels.

In Australia, the superannuation industry has a young upstart company working to drive the transition towards renewable energy and ethical superannuation investment. Founded in 2014 by Simon Sheikh, Kirstin Hunter, and Adam Verwey, Future Super has led by example with their ethical investment strategy. As one of the best performing funds over the last twelve months, we thought it best to turn to the ethical investment experts to better understand the future of the superannuation industry in Australia.

Kirstin Hunter is the Managing Director at Future Super, where she is leading the movement to use the power of money to invest, advocate, and campaign for a future worth retiring into.

 

 

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Geoff:

For those that are already Future Super customers, could you talk a little bit about why a future super has been so successful compared to a traditional superannuation fund in the last 12 months?

 

Kirstin:

Absolutely and I really appreciate the question. So at Future Super, we've long taken the view that investment in unethical business doesn't just have a detrimental impact on the environment and on society, it's also a bad investment choice that can damage Australians retirement savings in the long term. The reason for our strong performance throughout 2020, in particular over the last 12 months, is to do with the ethics that we put into our screening process. So, Future Super, as you know, is very strongly fossil fuel free. We don't invest in any kind of fossil fuels or their service providers. We also don't invest in alcohol, tobacco gaming, and other social ills. We don't invest in the high polluting airline industries. You can see that all of those areas that we don't invest in are those areas that have been hardest hit by the coronavirus crisis in particular. In this instance, it's very much that the ethics behind our investment philosophy is the reason for our outperformance.

 

Geoff:

Just following up on that, what can we learn about the long term outlook for the superannuation industry in general, based on the results of the last 12 months. I'm aware that it's a historical anomaly, but if there are things that we can learn, what would that be?

 

Kirstin:

The real silver lining to come out of this whole global pandemic has been that it has provided a really strong data point about the value of ethical investing with not just Future Super, but other ethical funds really outperforming over this period. I think no one really believes that this is a one-off thing. Disruption like this is the new normal. If we look back at the 2020 Bushfires, floods, global pandemic, market crashes; it's a lot concentrated all in one period. But I think the general feeling is that this type of turbulence is likely to continue. What I'm really feeling right now is that there is a shift towards starting to take more ethical considerations into investment decisions and not seeing those two things as separate.

I think what's really exciting in superannuation and what gives me a lot of hope for the future,and particularly over the next 12 months, is seeing some of the majors make really strong commitments around carbon neutrality and divestment. They're still talking on a 2050 timeline, which I would love to see more like 20, 25, or 2030. And I do think that's possible, but I think it's a really big step forward to be having this conversation. And hopefully what we're going to see is a bit of competition between the majors on their environmental credentials, which will make those targets much more aggressive.

 

Geoff:

Just to follow up on that quickly, you mentioned that there were other ethical investment funds that are in the same industry. Could I ask, based on the results from Chant West, what sets you apart from those other ethical super companies?

 

Kirstin:

We have a much stronger negative screen than even other ethical funds. We have a negative screen, which is a hard no. Any companies that materially take revenue from any of the industries that fall or any of the activities that are listed on our negative screen, we won't even consider. Then from there, the approach that we take is sort of very similar to what any other investment manager would take. So once we've screened out all the bad guys, we have a universe of companies that we will look at and take into account all of the normal investment considerations. We do also have a positive screen as well, for example, our renewables plus investment option, we have a target of having 20%, of money in that fund in renewable energy. Having that sort of proactive focus on renewables has been part of the story as well because there's a lot of upside in renewable energy at the moment. With the world and Australia shifting more towards renewable energy sources in order to meet our Paris climate targets we are hoping to see that trend continue.

 

Geoff:

Speaking of targets, according to the Institute of Sustainable Futures report from the University of Technology Sydney, divesting just 7.7% of Australia's super investment could fund Australia's transition to one hundred percent renewables. First, could I ask, roughly how close are we to that target? And secondly, what do you see as some of the major challenges in getting to that target over the longterm?

Kirstin:

It's a really great question. We're actually just revisiting that research at the moment. I don't have an answer for you of how close we are across an industry-wide level of getting to that target. Last time we looked at it, it was around 1% was invested in renewables. It presents a really strong argument against the idea that we can't afford to move to a renewable energy economy, or that we don't have the money to invest in this infrastructure. The money is sitting there in our superannuation and that is owned by all of us. Individuals in Australia do have that power to take control of their money to choose an investment, or to choose a superannuation fund that doesn't invest in fossil fuels, that does invest in renewable energy, and make sure that their retirement savings are invested in a way that's building the future that they want to retire into.

 

Geoff:

I really like that line of 'building the future you want to retire into'.

 

Kirstin:

It's super important particularly for superannuation because it is such a long term investment. And, you know we might have someone who has just joined Future Super who's in their first job. So we may be managing their money for 40 or 50 years. And what's important to that person in having a comfortable retirement, isn't just how much money they have in their superannuation account by the time they access, it's the world that exists around them in which they're going to be spending that money. And I think particularly, of all of the investment managers, it's so important for superannuation funds to take that point of view because we do manage our member's money for the longterm.

 

Geoff:

Yeah, definitely. And I imagine you do get quite a high percentage of younger investors, so that would be extra important for them too.

 

Kirstin:

Yeah, definitely

 

Geoff:

Future Super was the first super fund to invest in the national energy market through Plenti. How important do you see this peer to peer lending system being in the coming years and how successful do you see it being?

 

Kirstin:

Yeah, great question. So we were really proud of being able to be the first superannuation fund to invest in it. And it's one of the benefits of being a small fund is that we can be quite nimble and innovative when it comes to these types of products. What's been really great to see is how many other investors have jumped on board. From a Future Super perspective, the Plenti platform is so popular that it's actually hard for us to put large amounts of money into it because it's so competitive with other people wanting to invest in it. I think it's plugging a really important gap at the moment in being able to finance the expansion of renewable energy. I'm really excited to watch that unfold and I hope they can continue to have success in the future.

 

Geoff:

Wow. An excess demand for investment. Wow.

 

Kirstin:

We've found that in a couple of the products where we've been the seed investor, the first institution to commit to putting money in, and then once a new investment product gets its first institution, it makes it that little bit easier to get the others. Once we get a chance to actually demonstrate the investment philosophy and it has been successful, then other people jump on board as well. A similar thing happened with the infidel, a renewable energy debt fund that we started a few years ago. Again, it's had a very, very strong performance and now it's oversubscribed with other people wanting to put money into it as well.

 

Geoff:

Can I ask you about that actually? I'm getting the sense that Future Super is a leader in the sense of taking the first step into these new projects and then people think 'the water's fine' and they also join. Would you credit that to Future Super being the successful new company in the industry or do you think it's because products themselves are such good investments that they grow organically?

 

Kirstin:

I think it's both. I think in many ways, Future Super is an expert in renewable energy investment from a superannuation perspective. So, if we decide to make an investment into a particular product, then that does send a message to others in the market that it's passed our due diligence screening process. I think the products themselves definitely stand on their own two feet once they get off the ground, which is a great thing for our members. It's a great thing for other investors as well. But I think that sort of approach you described where Future Super is the first mover. We show that it can be done and then others follow. That's really our approach within the superannuation industry as well.

 

Kirstin:

And to look back to that 7.7% report, we don't actually believe that Future Super needs to be in a position where we're controlling that 7.7%. But what we hope to do is to be able to show other superannuation funds that you can create really healthy, diversified portfolios that completely exclude fossil fuels. You can deliver really strong returns to your members on a portfolio that excludes fossil fuels. And by showing that it is possible, we make it that little bit easier for the other super funds to take that next step. We give them a lot more urgency towards making those changes as well.

Geoff:

Yeah, I think it comes back to the idea of the only good business being an ethical business in the future. You're giving that real-life proof to that as well by leading that change.

 

Kirstin:

That's what I hope. We've just come off the back of the Royal Commission into financial services. We have many examples of companies that do unethical things that 20 years ago, they would have happened behind closed doors. No one would have been able to speak about them now in a social media era. Those things that used to happen behind closed doors now happen in the public sphere. Investors and shareholders are punishing companies for ethical transgressions in a way that they just hadn't previously. At the discussion of the results for AMP a couple of weeks ago, 10 out of 11 questions that the CEO got at the presentation of the results were about their culture of sexual harassment. I think that just really goes to show that sort of cognitive dissonance, where the role of a company is to make money above anything else. It's nice that doesn't really exist anymore in 2020.

 

Geoff:

I think it shows the value of public outrage as well. Because people can feel apathetic when you see companies getting away with unethical behavior.

Kirstin:

Actually, it's having a huge impact. To bring it back to superannuation, it's the same kind of thing. We have a lot of members reach out to us who might be with an industry fund that their ABA requires them to be in, or they might have a certain type of retirement products that they can't move easily. But reaching out to their super fund, asking the question, 'what's their stance on fossil fuels', asking 'why the sustainable fund invest in Rio Tinto', 'what they're doing about the horrific destruction of Indigenous cultural sites. I think super funds are getting those questions from members more and more. And again, that's something that we hope to empower people to do so that even if they don't make the decision to join Future Super, they might at least look at their existing super fund with a bit more scrutiny.

 

Geoff:

Finally, at The Climatized, our focus isn't just on imagining what the future might look like, it's also talking about what we want that future to look like and how we want to shape it. So for you personally, what are a couple of other things that you might want to see happen in your own climate change utopia?

Kirstin:

Our purpose at Future Super is to build a future free from climate change and inequality. We see that as a super fund, we have a real role to invest, advocate, and campaign to build the future that we all want to retire into. One of the really important things for me is, I think that business needs to reset the way it thinks about things and not see profit as the ultimate goal. In particular, there's this idea that the role of a company is to make money for shareholders. The really interesting thing for me is that in Australia, half of the shares are owned by super funds. Super funds exist to provide benefits for their members. And so I would love to see business make that mental adjustment that, 'actually, it's not just about the money we make for shareholders'. It's about, 'who are those shareholders'. At the end of the day, they're all of us and business needs to see their role as being more centered within the community rather than as a moneymaking vehicle for investors.

 

If you'd like to take a step towards building the future you want to live in, you can sign up to Future Super today!

Interview conducted by Geoffrey Miller

 

 

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