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A$8bn Local Govt Super to ditch coal and tar sands – Aussie minerals industry rubbishes SRI

Growing number of Australian investors reduce their coal exposure, and coal industry fights back by criticising SRI performance.

Local Government Super (LGS) the A$8bn (€5.6bn) Australian superannuation for local government or related employers in New South Wales, is to divest companies from its portfolios that have a ‘high carbon sensitive’ exposure to coal and tar sands mining and coal-fired electricity generators over concerns about their future investment risk, and part replace them with more exposure to companies in nuclear power.
The move comes amid an increasingly public tussle between the coal industry in Australia and investors that are divesting coal companies. Earlier this week, The Minerals Council of Australia (MCA), which says it represents the industry “in advancing its contribution to sustainable development and to society” published a report claiming that socially responsible investment options are ‘niche’ products with a small share of the total Australian superannuation market and that they tend to underperform conventional options with similar asset allocations over long investment horizons after fees and tax.
LGS is introducing a negative screen from MSCI ESG Research to remove companies with a minimum of one third of company revenue from coal and tar sands activities. This will mean selling off some A$25m in shares in companies including Whitehaven Coal and AGL Energy. The fund said that while the use of renewable energy would increase it would not meet current energy needs in a lower carbon future. As a result, it had decided to remove a nuclear energy screen from its list of excluded industries, noting that it was “increasingly becoming a viable, low carbon emitting energy source globally.”LGS says it has approximately A$5bn invested in responsible investment strategies across Australian shares, international shares, property, absolute return and private equity asset classes. Peter Lambert, LGS Chief Executive Officer, said the divestment decision reflected its view that coal and tar sands companies would be adversely affected from an investment perspective “by the likely transition to a lower carbon economy as governments respond to the increasing threat of climate change.” He said: “Coal and oil sands are the most carbon intensive forms of energy and most susceptible to carbon regulatory risks. With trends such as competitive pressures in the coal industry, concerns in China over pollution and water, and the introduction of energy and carbon efficiency standards on the utilities sector in the US indicating a shift away from a high carbon to a lower carbon economy, we believe that support for these sectors will decrease as will shareholder value.”
Last week, the Australia National University announced it was divesting A$16m shares – or 5.1% of its Australian equity holdings – in seven fossil fuel companies including Newcrest Mining, Iluka Resources, Oil Search and Santos. The review, commissioned by the university as part of its Socially Responsible Investment Policy was carried out by CAER, the Australian ESG research house.
Last month, RI reported that Hesta, the A$29bn super fund for health and community services was restricting new investments in thermal coal companies.