The Australian National University’s decision to sell $16 million worth of fossil fuel investments puts it in good company. The City Of Moreland in Melbourne took a similar decision last Friday, joining Seattle in the United States, Oxford in the UK and Dunedin in New Zealand in divesting fossil fuel stocks. Stanford University in the US decided in May to quit its investments in fossil fuel companies in its US$18 billion endowment fund, becoming the first US university to do so. AMP has also made a similar decision in respect of its socially responsible funds. Hunter Hall, the Sydney-based investment group has made a similar decision; even the Rockefeller family, who gave the world Big Oil, have made a similar decisions to quit fossil fuel investments.
Strangely, there’s been no comment from Prime Minister Tony Abbott about those decisions like he has made repeatedly about ANU. “Of course they should be free to do what they want, but when they make stupid decisions we should be free to criticise them,” Abbott said yesterday about ANU. “Any entity which says that they’re simply not going to invest in energy companies is frankly depriving its members of the benefit of some very good investments.”
Abbott knows all about stupid investment decisions — he’s the man who urged mining investors to take their money out of Australia and put it into Zambia and Ghana in 2010, when Australia was ranked the world’s best place for mining investment by independent foreign analysts.
His current advice isn’t much better than in 2010: Santos, Woodside, Whitehaven Coal, BHP and other fossil fuel companies have seen their share prices fall sharply of late. World oil and coal prices are falling — oil peaked in 2008 at US$148 a barrel, thermal coal prices have fallen by well over 60%, and coking coal prices peaked in 2011 (after the floods in Queensland slashed world supplies of both types of coal). Even leaving aside the moral questions concerning global warming and climate change, ANU can be justified on the basis of the losses incurred in holding any investments. The trustees of the ANU’s funds have a duty to make sure they don’t incur losses. Possibly the Prime Minister believes that ANU should retain losing investments as a kind of moral statement about the glories of fossil fuel.
- Oil Search is arguably best-placed and should finally be about to rake in the cash next year from the massive new PNG LNG project, run by ExxonMobil, but it’s been a long wait and the company’s shares have dropped from record highs in recent months, and are trading right where they were a year ago, about $8.50;
- Santos has remained volatile, falling 15% from $15 to $12.70 and is struggling to shore up supply to its equally massive Gladstone LNG export project in Queensland, with endless controversy surrounding development of its Narrabri coal seam gas field in northern NSW, which could yet be written down;
- Nobody needs an excuse to sell Newcrest Mining, which has dropped another 16% over the past 12 months, from $12 to $10 (remembering it peaked above $40) in line with the sagging gold price, and has huge challenges at the Lihir mine in PNG;
- ILUKA has dropped 35% from $11.50 to $7.50 amid soft demand for mineral sands and lower iron ore royalties from its stake in the Pilbara; and
- The other three companies are smaller but have hardly shot the lights out: Independence Group has done best, trading flat around $4. Sirius Resources has dropped 8% from just over $3.05 to $2.80, and Sandfire Resources has dropped circa 14% from $6.70-odd to just over $5.70.
And strange that Abbott has been so voluble on the ANU’s divestment when he had so little to say about the Commonwealth Bank gouging and ripping off investors via its financial planning arms, to the tune of hundreds of millions of dollars. Seems you can treat investment funds how you like — as long as it doesn’t upset the resources sector.
In May, AMP Capital announced that its ‘’responsible’’ funds would have limited scope to invest in certain mining and energy companies. The changes resulted in 56 companies ruled out of bounds for the funds, with the affected industries grouped with pornographers, weapons manufacturers, gaming companies, uranium miners and producers of alcohol and tobacco. Those funds are substantial, managing around $3 billion of the AMP’s more than $90 billion or so of investments. That’s broader than what ANU decided to do, but the AMP has escaped criticism from the likes of the Australian Financial Review, or senior politicians.
Hunter Hall said in June — again sans commentary from Abbott, or campaign from the AFR — that it:
“… decided to widen the negative ethical screen for our retail funds to include fossil fuel stocks. Our negative ethical screen seeks to avoid investments in companies that are involved in activities that are harmful to people, animals, and the environment. We know from climate science that burning fossil fuels is having a powerful and accelerating impact on climate and the environment. After observing the gathering momentum of fossil fuel divestment campaigns and consulting a number of our supporters, it became clear that climate change was also a very important issue to many of our investors … Hunter Hall’s investment portfolios have always been underweight fossil fuel companies but our decision to end fossil fuel investments outright enables Hunter Hall to focus on new investment opportunities.”
The Future Fund, in contrast, yesterday made it clear it would not be quitting its fossil fuel investments. Managing director David Neal said it would not be divesting from fossil fuel companies on ethical grounds. Rather, the fund’s investment managers would “work with” companies on “environmental, governance and social issues”.
“We think exclusions are very much a last resort – engagement is the way to influence good governance,” Neal is reported as saying. “[For us the question on] fossil fuel relates to the potential to impact on the demand for these, such as the creation of new energy technology and the value of reserves, that’s something that we need to worry about.”
Engagement is indeed a way to influence governance. But no amount of governance can address the problems created by reliance on fossil fuels. And no amount of governance can help when major commodity markets are moving against you.