Industry Super Holdings is under pressure to divest its stake in a company that supplies weapons technology to Saudi Arabia from the global community.
A study conducted by consumer watchdog and activist group SumOfUs reveals ISH, which is owned by industry superannuation funds, as a major investor in Electro Optic Systems (EOS), an ASX-listed firm operating in the military and space sectors.
ISH, which is owned by a number of industry funds (one of which is AustralianSuper), is the parent company of IFM Investors and Industry Super Australia.
InvestSMART data shows ISH has a substantial (5.86%) stake in EOS or 5.4 million shares.
ISH said in a statement that defence technology industry is one of the most heavily regulated industries.
"IFM Investors has received assurances by the company that Australian Government and Saudi internal processes around this purchase, will mean that EOS platforms will not be deployed in Yemen.
"If IFM Investors receives information relating to misuse of the products supplied by EOS or any other company, we will seek to engage with the company and will re-evaluate our position," ISH said.
It added that it sought and received assurances from both external research provider and the company.
A poll commissioned by SumOfUs found the majority (64%) of Australians want to follow the lead of Germany and Finland and suspend arms trading with Saudi Arabia.
Many (63%) said they were uncomfortable with their super fund's investment in such companies and would consider switching funds. Those that are likely to switch funds were mainly female.
Saudi Arabia has been accused of committing human rights atrocities as part of the ongoing conflict in Yemen, SumOfUs said, adding that this year marks the anniversary of the war.
EOS is backed by $30 million in subsidies from Australian taxpayers and has signed over $400 million in deals to "supply high-tech killing machines" to Saudi Arabia and the United Arab Emirates, SumOfUs wrote on its website.
"Australia's top defence officials last week refused to rule out that these weapons will be used in Yemen," it said.