I’m sure you have all seen and read about the destruction of 46,000-year-old Indigenous caves at the Juukan Gorge as part of Rio Tinto’s mine expansion. This event feels like a threshold moment, more significant than the ever-present tension between investment returns and ESG issues. Perhaps it was just the worst possible timing, but this feels like a moment where a company would be considered by millions of Australians to have lost its social license to operate. Yet nearly all these Australians would be invested in Rio shares through their super fund.

What has been the response of the superannuation industry? We clearly have values and value at play. No doubt it is a difficult, multi-faceted situation. Precisely the time when strong leadership is required.

There are many possible responses that a super fund could take.

A fund could take a strong stance, say that Rio Tinto has broken its social contract and question the long-term sustainability of the company. The fund could divest its stock and make Rio work to rebuild trust and earn back its status as an investable company. Rio makes up less than 2 per cent of the All Ordinaries Index so funds would hardly be pulling down the foundations of their portfolios. They could make their case publicly and they could make it directly to their members. So far no super fund has taken this path.

A second, alternative stance would be to do little, lie low and hope the passage of time will sweep the issue away. If prompted, funds could have a reasonably generic response that Rio is a good company which made a mistake but have apologised and are taking actions to make sure they deal better with these situations. This is clearly the path of convenience and keeps funds out of the media spotlight.

A third position would be for a fund to actively engage with Rio management and board to understand exactly what happened and express that this behaviour is not acceptable. Many funds argue that they can have a greater impact by engaging as a shareholder. Perhaps, or alternatively, Rio might engage more actively with the investors whose trust it is trying to re-establish.

It seems that most super funds are operating somewhere between the second and third options; to what degree is unknown. Australian Super, UniSuper and First State Super have all made it public that they have engaged with Rio.

First State Super’s position is interesting; they have removed Rio from their SRI options but not their main funds which are many times larger. Should this be interpreted that Rio instantly failed socially responsible investing criteria but that it remains an appropriate investment for the large majority of their members despite First State Super’s leadership position on ESG?

Some funds have announced the establishment of Reconciliation Action Plans but have then been silent on this issue. Also of interest has been the modest profile of the proxy advisers – surely this is their moment to be strong leaders.

Which brings us to member communications. Of the 12 leading Australian funds (as identified by RIAA in their 2018 benchmark report), only one (UniSuper) has provided a single piece of information on their website informing their members of their position on Juukan caves and Rio Tinto. But they most likely have a response ready for inbound queries… it seems like the management position is to be a small target: don’t be proactive and have a response plan at hand.

This isn’t an easy issue, but the great leaders shine in difficult circumstances. The super industry has a long list of peer group agency challenges. Should we add leadership to that list?

*Colin Tate is publisher of Professional Planner, Investment Magazine and Top1000Funds.com