The attitudes and actions of companies in response to global warming are coming under some serious scrutiny, thanks to a new Australian enterprise called the Climate Advocacy Fund. [16 November 2010 | Peter Boyer]
In younger days I enjoyed dipping into a blue-covered book called, appropriately, Monty Python’s Big Red Book. One of my favourite pages explained “why accountancy is not boring”, then went on to show why it is.
Accountancy and investment were fair game for the young Monty Python set, for whom wealth management would have been a pointless pursuit. But I’ve come to realise (too late to benefit me personally) that getting to know how the money system works can be a real power for good.
In Australia it doesn’t go down well if you present yourself as being above the masses. The major players in our large corporations like to be seen as one of us, like Commonwealth Bank CEO Ralph Norris when he said of his bank’s mortgagees last week, “I understand that people are hurting”.
He may understand in the abstract, but neither he nor his corporate peers can possibly grasp what it really means to be under the hammer, right now. Multi-million-dollar incomes take care of that.
To reach this sort of level in business takes real focus, and an inevitable distancing from ordinary life. But the gap between this controlled, cloistered existence and the messy reality of the outside world is widening, and therein lies a danger for business.
Some players in the money game are aiming to halt this trend and transform Australian corporations into better citizens. One group has come up with a truly novel, and potentially effective, way to challenge how our corporations treat their environmental and social responsibilities.
The Climate Advocacy Fund, established this year by Sydney-based Australian Ethical Investment in partnership with the Climate Institute, seeks to improve Australian companies’ climate policies and practices by buying into them and, as a shareholder, engaging in “persistent, methodical and informed” questioning of their actions.
The relative success of ethical investments over the 2008-09 financial crisis is good evidence that companies with strong sustainability measures in place also tend to be successful financially. Yet over the past five years not one shareholder resolution about environmental or social responsibilities has made it on to the agenda of an Australian company’s general meeting.
That is until now. In September the Climate Advocacy Fund embarked on a paradigm-changing mission, seeking to have resolutions about the carbon footprints of four mining companies placed on to the companies’ annual meeting agendas. Initial results have been interesting.
The fund’s first targets are four mining companies. One of them, Oil Search, has the Papua New Guinea government as its biggest shareholder, but the company’s capital is mostly Australian. The rest are Perth-based: Woodside Energy (oil and gas), Aquila Resources (mainly coal and iron) and Paladin Energy (uranium).
As a shareholder holding the required number of votes, the Climate Advocacy Fund was entitled to put questions to each company’s board. The questions sought disclosure of Oil Search’s emissions reduction strategy and Woodside’s carbon price assumptions.
Paladin and Aquila were asked to disclose carbon emission levels and trends, along with future climate risk policies. The fund’s statements supporting the Paladin and Aquila resolutions cited data from Trucost, a UK carbon footprint analyst, indicating that the companies’ carbon emissions were several times the average of all ASX-200 companies.
The fund aims to get companies to take climate action seriously by persuading them that their future depends on it. The Climate Institute’s business director, Julian Poulter, sees the fund’s actions as protecting shareholders’ long-term interests by ensuring competitiveness in a low-carbon world.
Many investors want long-term security, says Poulter: “We’re trying to ensure that the companies account for the various regulatory and physical climate change risks that we know will materialise, so that we can protect these superannuation nest-eggs going into the future.”
The most positive response was from Oil Search, which accepted the fund’s resolution for its next annual meeting. Woodside Petroleum is taking legal advice before it decides whether to allow the resolution to be heard at its 2011 meeting.
The remaining two companies refused to allow the fund’s resolution to be included in their annual meeting agendas on the basis that the subject matter was the business of management, not shareholders. The most negative response came from Paladin Energy, due to hold its annual meeting next week, on November 25.
Disputing the Trucost assessment of its carbon emissions, the Paladin board said its mines were new operations and it was still gathering data. It claimed the fund’s resolution “seeks to impose a reporting obligation on [Paladin] in an inappropriate format, in an inappropriate manner and at a premature time.”
Climate Advocacy Fund director James Thier believes the negative responses may breach the Corporations Act. The fund may be forced into its own legal action, because in this free-market era we can’t expect companies to regulate themselves into being good corporate citizens, or governments to police them effectively.
Money speaks. Corporations will act if they come to see that good climate policy and financial viability go hand-in-hand, and in this crucial process the Climate Advocacy Fund may turn out to be a lynchpin.