‘Socially aware’ superannuation funds among those investing billions in gambling industry

Australia's biggest super funds have poured more than $4.2bn of workers' retirement savings into the gambling industry - including pokies manufacturers, casino operators and lottery companies - even through investment options that claim to be "socially aware".

Investors in Australia's biggest poker machine operator, Endeavour Group, which runs 12,539 pokies across 300 hotels, include the "Socially Aware" option run by the nation's biggest fund, AustralianSuper, and the "Sustainable Growth" option offered by the retail employee fund Rest.

AustralianSuper's Socially Aware option is also invested in casino operators and Australia's biggest pokies manufacturer, Aristocrat Leisure Ltd.

Australia's third biggest super fund, Aware, which promises to "invest your super in ways that will do good for your community", is also a big holder of gambling stocks, including Aristocrat and Endeavour.

Guardian Australia analysed portfolio holdings disclosures for the most popular investment options offered by the 10 biggest superannuation funds in Australia, as well as socially aware options offered by AustralianSuper and Rest.

Under laws brought in last year by the Morrison government, superannuation funds are required to provide details biannually of what they invest in. The data analysed was the most recent available and was correct as of 30 June this year.

It reveals that the 10 biggest super funds all invest in Aristocrat Leisure, owning a total of at least $1.67bn worth of shares. It is one of the world's largest poker machine manufacturers as well as a gambling app developer. In 2021, the company generated $4.7bn in revenue and held 80% of the market share in pokies in Australia, according to Ibisworld.

Australians lose about $25bn to legal forms of gambling every year, according to recent estimates from the Australian Institute of Health and Welfare. Last year they lost more than $11.4bn to poker machines alone.

AustralianSuper holds 6.6% of Aristocrat's shares after increasing its stake from 5.05% in June this year. In June, the fund had nearly $921m invested in Aristocrat through its most popular option, Balanced.

The Balanced option also invested $624m in Endeavour, $148m in Tabcorp and $661m in Lottery Corporation, which runs lotteries including Tattslotto and Oz Lotto and was spun out of Tabcorp in May. It also had $103m invested in SkyCity Entertainment, which runs casinos in New Zealand and Adelaide, and $4m in the troubled Sydney casino operator Star Entertainment.

AustralianSuper's Socially Aware option also includes $16m in Aristocrat shares, along with holdings in four more of the six biggest Australian-listed gambling companies, amounting to nearly $45m this year. The Socially Aware option screens out companies that directly own fossil fuel or uranium reserves, or produce tobacco, cluster munitions or land mines, have single-gender boards, or "have received a red flag rating on labour rights, human rights, environmental or governance controversies". AustralianSuper's marketing does not mention gambling.

A spokesperson for AustralianSuper said the fund did not exclude particular industries, other than tobacco.

The fund had been "actively engaging" with gambling companies "to understand the initiatives they have to ensure high standards of responsible gaming and appropriate governance practices are in place", the spokesperson said.

"We will remain vigilant to ensure these companies are consistently acting in line with community and investor expectations and can deliver long-term value for members."

Aware Super champions itself as a wholly ethical fund that is "at the forefront in responsible investing, leading and collaborating with a common purpose" and that it is "investing in good". As at June 2022 its most popular, high-growth option had invested some $460m in Australian gambling companies, including $219m in Aristocrat.

A spokesperson for Aware said: "We invest across an exceptionally wide and diverse range of industries and the gambling sector is just one of these. Importantly, members with ethical concerns around the gambling sector can choose one of our socially responsible investment options, which have no gambling exposure."

Rest claims its Sustainable Growth option excludes companies that earn more than 5% of their revenue from gambling - but of the $106m invested in the relatively small option, more than $400,000 is held in Endeavour shares.

Endeavour does not disclose how much of its revenue comes from its 12,539 poker machines.

The shareholder activist Stephen Mayne, a long-time opponent of the pokies industry, estimated that Endeavour reaps between $1.5bn and $1.6bn in revenue from its poker machines every year.

An Endeavour spokesperson declined to comment on Mayne's estimate but said the total revenue from its hotels business was $1.5bn last year, out of total sales of $11.6bn.

"For competitive reasons, we do not disclose the breakdown of the revenue streams in our hotels," the spokesperson said.

"We report to the market in accordance with all accounting standards and laws."

A spokesperson for Rest said: "We are confident that the gambling exclusion is currently correctly applied."

All of the fund's investment decisions were "made in the best financial interests of our members", the spokesperson said. Rest was an "active owner" that prioritised "engaging with companies as a shareholder" on environmental and social governance matters, and monitored its screens and exclusions "on an ongoing basis, including those that apply to the Sustainable Growth option".

Mayne criticised AustralianSuper for buying more shares in Endeavour after its separation from supermarket group Woolworths in June last year - a demerger that followed criticism of the retailer for being involved in pokies.

"I think it's a disgrace that Aussie Super, after Woolworths demerged Endeavour Group, they've consciously gone out and aggressively bought more shares in Endeavour Group, knowing it's Australia's biggest pokies operator," he said.

He contrasted AustralianSuper's attitude with that of other investment funds, which sold their Endeavour shares after receiving them in the demerger "because they didn't want to be investing in specialist gambling companies".

Anyone who knowingly invested in Aristocrat was "profiting from misery", Mayne said. "I think [Aristocrat is] responsible for enormous misery."

A spokesperson for Aristocrat said all poker machines sold to venues in Australia were "highly regulated and are compliant with a wide range of technical standards and regulations which take into account harm minimisation".

The chief executive of the Alliance for Gambling Reform, Carol Bennett, said gambling companies were "as bad as it gets when it comes to corporate responsibility".

Public awareness about gambling harm was growing, Bennett said, particularly in the wake of inquiries into Crown and Star casinos, which found a series of licence breaches, including evidence of money laundering and criminal involvement in junket operators that bring high-rollers to Australia.

A royal commission in Victoria also found that Crown consistently breached its licence by allowing people at its Melbourne casino to gamble on poker machines for at least 12 hours at a time before checking that they were OK.

"I think a lot of people are shocked by what they've seen and they're increasingly concerned," Bennett said.