The Claim
“Added new rules to force superannuation funds to maximise returns regardless of anything else, which is a step towards disallowing super funds from having ethical and environmental screening, such as not investing in weapons manufacturing, or companies with slavery in their supply lines etc. It's unclear how any fund can comply with this requirement without choosing maximum-risk investments.”
Original Sources Provided
✅ FACTUAL VERIFICATION
The Coalition's "Your Future, Your Super" reforms announced in the 2020 Budget did introduce new rules around superannuation fund management, but the claim significantly overstates what the reforms actually require [1].
The Treasury document and legislation do establish a "best financial interests duty" for trustees [2]. However, this duty is not about "maximising returns regardless of anything else" - it is about maximising members' retirement savings in their best financial interests [1]. The Treasury explicitly states the goal is that "trustees must act in the best financial interests of members" [2].
The key legislative change requires trustees to demonstrate that actions are "in the best financial interests of their members," with particular emphasis on net investment returns (returns after fees) [1]. The legislation does NOT ban ethical screening - it requires that if funds make investment decisions (including ethical screening decisions), they must be able to justify them as being in members' financial interests [2].
The performance test introduced focuses specifically on "net investment returns" - the actual returns members receive after fees [1]. This is designed to hold funds accountable for actual financial outcomes, not to mandate investment strategies [1].
Missing Context
The claim omits several critical points:
1. "Best financial interests" is not the same as "maximum returns"
The Treasury document repeatedly states the goal is maximising "retirement savings," not maximum raw returns [1]. These are different concepts. A fund can pursue ethical screening while still maximising retirement outcomes if the screened portfolio delivers competitive returns [1].
2. Ethical screening and financial returns are not necessarily opposed
The claim assumes ethical screening inherently reduces returns. However, many funds offering ethical screening (like Australian Ethical Superannuation) report competitive or above-average returns [3]. The relationship between ESG/ethical screening and financial performance is complex and contested in academic literature, but the two are not fundamentally incompatible.
3. The law does not ban ethical screening
Neither the "Your Future, Your Super" reforms nor the "best financial interests duty" explicitly bans ethical or environmental screening [2]. The reforms require that any investment decision (including ethical screening) must be defensible as being in members' financial interests - but this is a different requirement from banning such screening [2].
4. Trustee obligation to justify decisions
The reforms reverse the burden of proof: trustees must now establish a "reasonable basis" to support their investment decisions being in members' best financial interests [2]. This applies to all decisions, including ethical screening decisions. A fund could maintain ethical screening if it can demonstrate the strategy still delivers competitive returns [2].
5. Difference between restriction and performance accountability
The reforms don't restrict fund investment choices - they impose accountability standards for those choices. A fund can choose ethical screening, fossil fuel divestment, weapons exclusions, or any other strategy, provided they can justify it as being in members' financial interests [2].
Source Credibility Assessment
The original source is The New Daily [4], which is owned by Industry Super Holdings [4]. This creates a clear institutional bias: the publication is owned by an industry super fund industry representative body. Industry funds were actually among the strongest proponents of the Your Future, Your Super reforms, so this source's concern about the reforms "tying members to a dud" represents an industry perspective warning about implementation risks, not a fundamental opposition to the policy.
The article does quote Bernie Dean (Industry Super Australia CEO) raising legitimate implementation concerns [4], but the framing emphasizes risks rather than providing balanced analysis.
Labor Comparison
Did Labor do something similar?
Labor has not proposed repealing the "best financial interests duty" or the performance testing regime. In fact, Labor supported many elements of the Productivity Commission recommendations that underpin the Your Future, Your Super reforms [4].
Labor opposition to the reforms (through spokesperson Stephen Jones) focused on implementation risks - particularly the risk of members being "stapled" to underperforming funds - rather than opposing the concept of accountability measures [4].
Labor governments have not introduced legislation to explicitly ban ethical screening in superannuation. Under both Coalition and Labor governments, the superannuation system has operated under a fiduciary duty framework that requires trustees to act in members' interests.
Balanced Perspective
The Coalition's actual position:
The Coalition's "Your Future, Your Super" reforms do impose stronger accountability on superannuation funds to demonstrate that investment decisions are in members' financial interests [1][2]. However, this is NOT the same as "forcing funds to maximise returns regardless of anything else."
The reforms establish performance testing based on "net investment returns" - actual returns members receive [1]. This is a legitimate regulatory approach to address underperformance identified by the Productivity Commission, where 21 of 77 MySuper products underperformed their benchmarks by more than 0.5 percentage points, costing members at least $10.7 billion over 10 years [1].
How it affects ethical screening:
The "best financial interests duty" does create a legal framework that requires trustees to justify their investment decisions. For ethical screening, this means:
- A fund practicing ethical screening must be able to demonstrate the strategy still delivers competitive, or at least acceptable, returns for members [2]
- A fund cannot pursue ethical screening if it significantly compromises member returns without justification [2]
- This is a standard of accountability, not a prohibition [2]
The legitimate concern:
Industry Super Australia CEO Bernie Dean correctly identified a genuine implementation risk: if a member is stapled to an underperforming fund, it could take years to recognise the problem and cost them hundreds of thousands in retirement [4]. This is a valid concern about the "stapling" mechanism, not about ethical screening itself.
Expert analysis:
ASIC has emphasized that superannuation trustees can offer ESG/ethical products, but must avoid "greenwashing" - making false claims about their ethical credentials [5]. This regulatory approach allows ethical screening while requiring honesty about what the screening actually delivers [5].
The reforms do not ban ethical screening. They require that any investment strategy - whether pursuing ethical screening or maximum growth - must be defensible in terms of member financial outcomes.
Key context: This is not unique to the Coalition - the fundamental principle that trustees must act in members' financial interests has existed under both Coalition and Labor governments. The 2020 reforms strengthened accountability mechanisms for demonstrating this, but did not introduce the concept.
PARTIALLY TRUE
5.0
out of 10
The claim is partially accurate but significantly misleads about the scope and intent of the reforms. The Coalition did introduce stronger "best financial interests" requirements for superannuation trustees. However:
- The claim incorrectly suggests funds are forced to "maximise returns regardless of anything else" [1][2]
- The actual requirement is to justify investment decisions as being in members' best financial interests [2]
- The reforms do not explicitly ban or create a step toward banning ethical screening [2]
- The genuine issue is that ethical screening must deliver competitive returns - but this is not a ban, it is an accountability standard [2]
The reforms do create a framework where trustees must justify their decisions, which could theoretically be used to challenge ethical screening strategies that significantly underperform. However, the claim overstates this into a near-ban by mischaracterizing the requirement as "maximising returns regardless of anything else" when it is actually about demonstrating decisions are in members' financial interests [1][2].
Final Score
5.0
OUT OF 10
PARTIALLY TRUE
The claim is partially accurate but significantly misleads about the scope and intent of the reforms. The Coalition did introduce stronger "best financial interests" requirements for superannuation trustees. However:
- The claim incorrectly suggests funds are forced to "maximise returns regardless of anything else" [1][2]
- The actual requirement is to justify investment decisions as being in members' best financial interests [2]
- The reforms do not explicitly ban or create a step toward banning ethical screening [2]
- The genuine issue is that ethical screening must deliver competitive returns - but this is not a ban, it is an accountability standard [2]
The reforms do create a framework where trustees must justify their decisions, which could theoretically be used to challenge ethical screening strategies that significantly underperform. However, the claim overstates this into a near-ban by mischaracterizing the requirement as "maximising returns regardless of anything else" when it is actually about demonstrating decisions are in members' financial interests [1][2].
📚 SOURCES & CITATIONS (6)
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1PDF
Your Future, Your Super: Reforms to make your super work harder for you - Treasury (October 2020)
Treasury Gov • PDF Document -
2PDF
Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019 - Parliament of Australia
Legislation Gov • PDF Document -
3
Ethical Australian Super Fund - Australian Ethical
Join over 100,000 Australians who have chosen Australian Ethical Super to invest for a better, cleaner and more sustainable future. Get in touch to learn more.
Australian Ethical -
4
Federal budget 2020: The pros and cons of the superannuation reforms - The New Daily (October 7, 2020)
The budget's proposed superannuation measures are an attempt to end costly multiple accounts and improve performance for members. But there is a risk.
Thenewdaily Com -
5
How to avoid greenwashing when offering or promoting sustainability-related products - ASIC
Fair, strong and efficient financial system for all Australians.
Asic Gov -
6
Super trustees in the post-ESG world - King & Wood Mallesons
Kwm
Rating Scale Methodology
1-3: FALSE
Factually incorrect or malicious fabrication.
4-6: PARTIAL
Some truth but context is missing or skewed.
7-9: MOSTLY TRUE
Minor technicalities or phrasing issues.
10: ACCURATE
Perfectly verified and contextually fair.
Methodology: Ratings are determined through cross-referencing official government records, independent fact-checking organizations, and primary source documents.