Background: AustralianSuper is Australia's largest super fund, managing over $410 billion for around 3.6 million members. It offers a range of investment options, including an ESG-focused portfolio designed for socially conscious investors. However, ESG funds have come under increasing scrutiny in recent years over whether they truly live up to their "ethical" label.

What happened: AustralianSuper has overhauled its ESG fund, removing nearly $1 billion worth of investments. This includes cutting 180 listed companies across sectors like defence, gambling, alcohol and fossil fuel-linked industries.

What else: This big change for AustralianSuper comes after a fair bit of criticism of “ethical” funds, which weren’t always investing in ethical companies. So for AustralianSuper, the criteria has become much stricter.

What's the key learning?

💡 Ethical investing is no longer a label for investors, it's something that funds actually have to prove. In the past, ESG funds could market themselves as "ethical" without clearly defining what that meant.

💡 Regulators are now demanding transparency and accountability if funds don't live up to their investing promises. For example, ASIC has taken 47 regulatory interventions in just over a year, including major fines for firms like Mercer and Vanguard.

💡 These interventions have forced funds to tighten their definitions and clean up their portfolios. But, stricter ESG rules can come with a performance trade-off. AustralianSuper's ESG fund has returned just 1.9% since August 2025, falling short of its performance target of inflation plus 3%.