News that Scott Morrison, a strong supporter of fossil fuels, has become Australia’s new Prime Minister has prompted calls for investors to think more seriously about sovereign bond exclusions over climate change.
Morrison, the country’s former Treasurer who famously brandished a lump of coal in a parliamentary debate, has replaced Malcolm Turnbull after a fierce leadership contest.
“This is coal, it was dug up by those who live and work in the electorates of those who sit opposite,” he said in the House of Representatives in February 2017, accusing those concerned about the environmental impact of the coal industry of having “an ideological, pathological fear of coal” – coining the term ‘coalaphobia’ in the process.
The social conservative and former Minister for Immigration argued coal has given Australia “an energy competitive advantage that has delivered prosperity to Australian businesses”.
Reacting the latest developments, Ulf Erlandsson, the former senior portfolio manager at Sweden’s AP4 who is now CIO at climate-focused hedge fund Glacier Impact, said on social media: “Question is: if this were a corporate CEO, would you have a discussion around putting the company on your coal investment exclusion list?
“But it isn’t a company, it’s a sovereign and it gets its capital from fixed income markets.“When you purchase Australian government bonds, you lower the cost of capital for this policy.
“You subsidize coal. Sveriges Riksbank [the Swedish central bank], for example, happily does it. In size. We need to start thinking properly around climate related investment exclusions in fixed income.”
“It makes me sad to be an #Australian and a reminder of why I don’t live there” – Fiona Reynolds
Glacier Impact is a credit based hedge fund that “aims to change the world while generating attractive returns to investors”.
Before the very latest political developments, the Australasia-focused Investor Group on Climate Change (IGCC), had tweeted in the context of the shelving of the National Energy Guarantee: “Important to remember this week that no matter who runs the country Australia must have an effective carbon policy framework. Otherwise, our economy (and community) will remain exposed to the costs and effects of climate change.”
Also on the thread was Fiona Reynolds, the CEO of the Principles for Responsible Investment, who tweeted: “Well you can only really just despair at the state of #climate policy in Australia, no forward thinking, no vision, just political infighting. It makes me sad to be an #Australian and a reminder of why I don’t live there.”