Ethical returns: How Gen Z is reshaping super fund investment priorities

As the next generation – dubbed Gen Z – joins the workforce in growing numbers, they’re bringing with them new attitudes to investments and superannuation that the industry is fast responding to.

Although not entirely unique to younger generations, these attitudes predominantly centre around ‘ethical investing’, which has become a higher priority in recent years than perhaps ever before.

While ethical investing typically conjures images of solar panels and wind farms, the scope is much broader. In practice, ethical investing is relatively personal and subjective, aligning very much with a person’s own morals and values. 

Ethical investing tends to be guided by ESG (environmental, social, and governance) principles, which may include any or all of the following:

Individuals who wish to practice ethical investing could be drawn to just one of these areas, such as fair trade practices. For others, an investment isn’t considered ethical unless it meets the full scope of ESG considerations. 

The breadth and depth to which a person considers these factors before investing is a matter of personal preference and, as we see with Gen Z, these preferences often change over time.

Myths about ethical investing and superannuation

In the past few years, a number of myths have sprung up around ethical investing. Here are a few of the main ones:

Myth 1: Ethical investing equals diminished returns

Many people assume that prioritising environmental, social, or governance factors comes at the cost of financial performance. In reality, there is plenty of evidence to show that ethical investments can perform on par with (and sometimes outperform) traditional investments over the long term.

A 2025 report from the Institute for Energy Economics and Financial Analysis found sustainable funds had a median return of 12.6% in 2023 compared to 8.6% for traditional funds. A study by Morgan Stanley also found that ESG funds outperformed traditional funds during the 2020 COVID-19 period, with 4.3% higher average returns and 3.1% lower volatility – demonstrating the resilience of an ESG portfolio even in a difficult market.

In the last financial year, one Australian ethical exchange traded fund (ETF) reported a return of approximately 16.05%, which is highly comparable to the performance of the broader Australian share market. 

Myth 2: Ethical investing is only about avoiding certain industries

While excluding sectors such as tobacco or fossil fuels is one approach, ethical investing can be both highly specific and broader in scope. 

For example, someone might decide they don’t want any of their superannuation funds going to mining companies. That’s perfectly valid, but what about banks that lend to mining companies? Asking questions like these help to understand exactly where you’re comfortable putting your money.

On the same token, other investors may be comfortable with mining but adamant that they’ll only support companies that can demonstrate strong practices around land regeneration, Indigenous inclusion, and community responsibility. 

Myth 3: Ethical investing is only for younger generations

Although younger investors (such as Gen Z) may be more vocal about ethical investing, interest in choosing ethical investment options spans all age groups. 

We often see people in their 40s, 50s, and even retirees prioritise values-driven investment strategies in their superannuation portfolios. This includes emerging investors and experienced investors who are highly familiar with the investment landscape.

Building an ethical investment portfolio

When a client says they want to invest ethically, our first question is: what does ethical mean to you? By understanding what is really important to them, we can start to build a portfolio around those ethics – knowing what to include and exclude based on their values. 

Significant research is required to build an ethical investment portfolio, particularly given the risks of greenwashing. Greenwashing occurs when companies claim to engage in ethical practices, but their actions tell a very different story. It’s a serious issue, and the only way to avoid investing in such companies is through detailed due diligence. 

For investors looking to take control of their superannuation – be it a young Gen Z with a small balance or a Gen X looking ahead to retirement – there are a couple of ways to do it.

Consider whether your superannuation fund has ethical investment options

Most super funds now offer this choice so you can align your investments with your values without changing providers. These options typically fall under the 'balanced' category, which includes a mix of growth and defensive assets. 

Funds may use negative screening to exclude industries like fossil fuels, tobacco and gambling, and positive screening to include sectors such as renewable energy, healthcare, and education. Some funds also offer certified ethical options, which are assessed by financial advisers who specialise in ethical investments.

If your current fund doesn’t offer ethical investment solutions, you could explore superannuation funds that specialise in ethically conscious investments. While you’ll need to review your wider arrangements (such as insurances in the fund) before deciding to change, these funds typically provide a higher level of transparency than you might find in a standard retail super fund. So it’s easier to understand exactly where your money is being invested. 

Do it yourself with a self-managed super fund (SMSF)

SMSFs can be more expensive and complex to set up and manage than standard super funds, but they offer a high level of control over how your retirement savings are invested. If you have a reasonable super balance and want to make specific investment choices, an SMSF could be a suitable option. 

For example, you can create a tailored share portfolio focussed on companies that align with your values. In some cases, you may even be able to invest in private companies that are engaged in projects you care about, if the investment meets certain conditions.

Ethical investing with support from RSM

As demand for ethical investing in superannuation grows among Gen Z and other generations, all eyes are on the industry to see how funds are adapting to changing expectations. If ethical investing is important to you, keep in mind that it’s important to get professional guidance before making an investment decision.

At RSM, our financial planning division helps clients build and manage their superannuation and personal investments by:

• Clarifying their goals and investment preferences
• Researching suitable options for consideration
• Implementing the investment decisions
• Monitoring and managing the portfolio over time
• Maintaining appropriate diversification, liquidity, and risk levels

Our primary goal is to support you in making informed decisions. If you’re unsure what you want to achieve, getting guidance can help you determine what matters most before you decide your next steps. 

For more information about how RSM’s financial planners can assist with ethical investments and your superannuation, please contact your local RSM office.