Canberra: Hostplus Pty, one of Australia’s largest pension funds, has included a major slot-machine operator in an ethical investment product that bars firms with even minor involvement in gambling activities.
The A$103bil fund’s Socially Responsible Investment (SRI) option has a small holding in Endeavour Group Ltd, the country’s top hotel operator that runs about 12,500 electronic gaming machines – known locally as pokies – throughout its venues.
Such machines are regularly cited as a key driver of gambling addictions in Australia, which loses more money per capita to gambling than any other country in the world.
Hostplus ensures that “exposure commitments are continually monitored”, a spokesman said in an emailed statement, declining to comment specifically on the Endeavour holding. “Exclusion data is reviewed on a quarterly basis, and any company that exceeds the exposure limits is automatically excluded.”
The SRI product is offered to Hostplus’s 1.77 million members as a way to invest their retirement savings in firms aligned to their personal values. The data that screens stocks linked to gambling is supplied by global index provider MSCI Inc, the website showed.
Among the list of restrictions are shares of companies that derive more than 5% of their revenue from gambling.
While Endeavour doesn’t disclose how much its gaming machines contribute to revenue, Bloomberg Intelligence estimates at least 5%-8% based on conservative calculations. The bulk of the firm’s income is earned from its retail division, which mainly comprises liquor stores.
Endeavour spokespeople declined to confirm the portion of company revenue that comes from slot machines, or comment on the Hostplus holding.
Australia’s A$3.5 trillion pension industry is under increasing pressure to back up its environmental, social and governance (ESG) claims, with the regulator suing two funds over allegations of misleading members on ethical investments.
The latest court action was only last month, when the Australian Securities and Investments Commission (Asic) accused Active Super of having 28 holdings that it claimed to restrict.
Data compiled by Bloomberg showed that Hostplus had less than A$80,000 of Endeavour shares in its SRI option. Still, the inclusion shows how fraught asset selection can be for the country’s pensions industry, known as superannuation, when offering ESG investments to millions of Australian workers that are becoming increasingly wary about where their money goes.
“Asic is considering a range of sustainability and ethically-related representations,” an Asic spokesperson said in an emailed statement, declining to comment on specific cases. “We have been scrutinising investment screens that are applied, and whether they are consistent with what super trustees are telling their members.”
A government report this month flagged increasing concerns about the widespread availability and addictive nature of pokies machines, which are staple features of pubs and clubs throughout the country. It also warned of the increased “addictiveness” of the machines.
Endeavour was part of Woolworths Group Ltd, before the supermarket giant demerged the business in 2021.
“Part of Woolworths’ decision to spin off the Endeavour assets was to dissociate from the poor perception of liquor and gaming,” Bloomberg Intelligence analyst Mohsen Crofts said. “I’d be surprised if the business didn’t raise concerns for investors wanting to limit their exposure to these industries.” — Bloomberg
