AustralianSuper’s “Socially Aware” Fund Pulls $26m from Pokies Giant Aristocrat Stocks

A spokesperson for the fund acknowledged in a statement that, as of December 31 this year, the “socially aware” option actually held a bigger stake in Aristocrat than its default balanced fund. So, the call was made so the fund could better meet the expectations of members.

As of June 2023, the “socially aware” AustralianSuper fund had over $26.8 million invested in Aristocrat, which represented 0.61% of the fund’s portfolio. But by early August, AustralianSuper confirmed that the fund had completely offloaded its stake in the pokies giant by selling it outright.

The “socially aware” fund only excluded investments in the tobacco industry until recently, but has now broadened the exclusion list to include investments in gambling, nuclear weapons, companies with animal welfare issues, and companies involved in palm oil.

The updated guidelines state that the fund will stay clear of any company that earns more than 5% of its revenue from gambling, including companies that lend their name or branding to gambling products.

While the “socially aware” fund has walked away from Aristocrat and gambling companies, AustralianSuper’s main default balanced option is still heavily invested in the pokie giant. Recent disclosures show it holds a massive $1.74 billion in Aristocrat shares, up from $920 million in mid-2022. The holding now makes up 0.73% of the fund’s listed investments, compared to last year’s 0.54%.

A spokesperson said that the fund is “reviewing Aristocrat’s initiatives in responsible gambling” but gave no indication of plans to reduce exposure.

As a matter of fact, AustralianSuper has been steadily increasing its stake in the pokie company, and as of the latest filings, the fund owns more than 7% of Aristocrat, up from 5% in 2022. It remains unclear how last week’s divestment from the “socially aware” fund will affect that figure.

Before the divestment was made public in late July, a spokesperson for Aristocrat defended the company’s position, saying that it operates legally within the tightly regulated gambling industry and has the most “robust risk management” in place.

We’re striving to continuously improve our sustainability performance, in line with our focus on long-term business performance, the expectations of our stakeholders and our company values.

AustralianSuper is not the only major Australian fund backing Aristocrat. Australian Retirement Trust has also increased its exposure in the pokie company, now holding around $226 million in Aristocrat shares through its default balanced option. The fund described this as a “modest increase over time”.

UniSuper is another superannuation fund that has seen its Aristocrat holdings more than double, from $139 million in June 2022 to $283 million. The fund attributed the rise to a mix of growing funds and a lift in Aristocrat’s share price.

Michelle Cameron, an executive director at Morningstar Sustainalytics, said that Aristocrat remains “a high-performing business”, averaging a 7.8% net income margin in recent years, which is well above the industry average.

She added that “From an investor’s point of view, it has a solid track record of returns and a strong balance sheet”. She noted, however, that its core business remains the gambling industry, which raises ethical concerns among some, so the real balancing act for super funds is to chase financial returns while weighing up social responsibility.

The Alliance for Gambling Reform welcomed AustralianSuper’s move and called it “a turning point for ethical investing”.

Martin Thomas, the group’s chief executive, said that the divestment from Aristocrat was “highly significant”. He said that although the divestment amount is small, the message it sends is huge: “Gambling stocks don’t belong in an ethically minded portfolio.”