Home > ASIC investigation requested into New Hope statements

ASIC investigation requested into New Hope statements

21 July 2021

Australian coal company New Hope has a track-record of dodging questions about the material financial risks to its business from climate change. That’s why this week EDO Australia, on behalf of Market Forces, wrote to the Australian Securities and Investments Commission (ASIC) requesting an investigation into potentially misleading or deceptive statements made by New Hope’s CEO [1].

The letter points out that New Hope has consistently cherry-picked International Energy Agency (IEA) scenarios that have a positive outlook for coal demand and omitted modelling that has dire consequences for the coal industry.

We also highlighted that when asked by members of parliament whether there was a reason New Hope refers to outdated IEA scenarios, the CEO replied – “Not really, no. I just haven’t got to it” [2].

This is clearly behaviour that should be ringing alarm bells. We’ve demanded that New Hope immediately stop this practice and update its shareholders with more recent and balanced information about IEA scenarios.

By continuing to rely on selective and favourable coal demand scenarios, New Hope is exposing itself to repercussions from regulators and the rest of us to climate disaster.

Gambling on failure of the Paris Agreement

The energy demand scenarios New Hope relies upon to justify its future business prospects are consistent with global warming of around 3ºC. This would lead to catastrophic ecological, social and economic consequences, and gambles on the complete failure of the Paris Agreement, which aims to limit global warming as close as possible to 1.5ºC.

As of July this year, 191 countries have ratified the Paris Agreement, while countries representing over 50% of the global economy have committed to net zero emissions by 2050 [3]. According to the IEA’s most recent report (Net Zero by 2050: A Roadmap for the Global Energy Sector), no new coal mines or expansions can proceed and coal demand must plummet in order to achieve net zero emissions by 2050 [4].

Actively expanding the coal industry

At a time when coal companies should be winding up their operations, New Hope is actively expanding the coal industry via its proposed $900 million New Acland Stage 3 coal mine – a 12 year expansion to the existing mine that would produce over 170 million tonnes of carbon emissions [5] and see three vast open-cut coal pits dug on the prime agricultural land of the Darling Downs.

Additionally, media reports suggest New Hope may be bidding to purchase BHP’s Mt Arthur coal mine, one of the biggest thermal coal mines in Australia [6]. New Hope recently raised $200 million of bonds, “for general corporate purposes, which may include further growth expansion and opportunistic M&A [(merger & acquisition)] activity” [7].

Institutional investment appetite is drying up

Dirty coal companies like New Hope are feeling the heat as finance and insurance companies slowly bring their policies towards alignment with the Paris Agreement. New Hope’s recent bond raising was funded entirely by overseas investors, with no Australian banks willing to participate [8], suggesting the walls are closing in for the ability of climate-wrecking coal companies to access finance.

However, we can’t let companies like New Hope off the hook.

We must keep up the pressure on every company still pursuing and willing to finance the expansion of the coal industry.

[1] Ben Smee,The Guardian Australia, New Hope mining company referred to Asic, accused of misleading investors over future of coal (21 July 2021)

[2] Reinhold Schmidt, Evidence to the Inquiry into the Prudential Regulation of Investment in Australia’s Export Industries (2021) p 38.

[3] United Nations, Race to Zero Campaign (2021).

[4] IEA, Net Zero by 2050, A Roadmap for the Global Energy Sector (2021).

[5] Market Forces, Australia’s pariah projects: the fossil fuel proposals threatening to bust our climate goals (2020).

[6] Melanie Burton (Reuters), Australian coal miners recapitalise, eye BHP assets and other M&A (2021).

[7] New Hope Corporation, Convertible Note Offering (2021).

[8] Reinhold Schmidt, Evidence to the Inquiry into the Prudential Regulation of Investment in Australia’s Export Industries (2021) p 37.

Take action!

Tell New Hope’s financial backers to stop funding companies expanding the climate-wrecking coal industry!

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I am very concerned that your bank has been a major lender to New Hope, whose plans to expand climate-wrecking coal mines are consistent with the failure of the Paris Agreement. I want you to confirm that your bank will not provide further financial support to New Hope, or other companies pursuing business plans consistent with the failure of the Paris Agreement. Any expansion of the coal industry is incompatible with the goal of the Paris Agreement to limit global warming to 1.5˚C above pre-industrial levels [1]. Yet New Hope is pursuing new coal expansions–like New Acland Stage 3–when the world desperately needs to transition to clean, renewable energy sources. Expansion of the New Acland thermal coal mine is also incompatible with achieving net zero emissions by 2050, according to the International Energy Agency’s (IEA) ‘Net Zero by 2050’ scenario that states “No new coal mines or extensions of existing ones are needed … as coal demand declines precipitously” [2]. New Hope has repeatedly justified its expansion plans with reference to coal demand projections that are consistent with more than 2°C of global warming [3]. Even 2ºC of warming would expose 37% of the world’s population to extreme heat, destroy 99% of the world’s coral reefs (including the Great Barrier Reef) and result in massive biodiversity loss [4]. At 3ºC of warming, ecosystems would become virtually unrecognisable, major cities would be inundated and global GDP losses could total more than 25% by 2100 [5]. Put simply, New Hope references demand scenarios consistent with catastrophic ecological, social and economic collapse. New Hope’s reliance on these coal demand scenarios is now the subject of a complaint to the Australian Securities and Investments Commission (ASIC) [6]. The complaint alleges that New Hope may have engaged in misleading or deceptive conduct by selectively omitting coal demand scenarios that are far less optimistic about the future of the coal industry. I also draw your attention to recent (June 2021) comments by New Hope’s CEO in evidence to parliament, who, when asked whether there was a reason New Hope referred to outdated IEA scenarios, replied – “Not really, no. I just haven’t got to it” [7]. New Hope’s reliance on selective and favourable coal demand scenarios to justify coal expansion exposes it to climate risks and the rest of us to climate disaster. I want you to confirm to me personally, and announce publicly, that you will not provide any further financial support to New Hope, or other companies pursuing expansion of the climate-wrecking coal industry. [1] SEI, IISD, ODI, E3G and UNEP, Production Gap Report (2020) https://productiongap.org/wp-content/uploads/2020/12/PGR2020_FullRprt_web.pdf. [2] IEA, Net Zero by 2050, A Roadmap for the Global Energy Sector (2021) https://iea.blob.core.windows.net/assets/405543d2-054d-4cbd-9b89-d174831643a4/NetZeroby2050-ARoadmapfortheGlobalEnergySector_CORR.pdf. [3] New Hope, Sustainability Report (2020) https://dq4q35go95sg8.cloudfront.net/wp-content/uploads/NHG-Sustainability-Report_2020.pdf p 23. [4] IPCC, Special Report: Global Warming of 1.5ºC – Summary for Policymakers (2018) https://www.ipcc.ch/sr15/chapter/spm/. [5] Adam Morton (The Guardian), Reserve Bank warns of 25% GDP loss by 2100 unless action taken on climate change (26 June 2020) https://www.theguardian.com/australia-news/2020/jun/26/reserve-bank-warns-of-25-gdp-loss-by-2100-unless-action-taken-on-climate-change. [6] Ben Smee (The Guardian), New Hope mining company referred to Asic, accused of misleading investors over future of coal (21 July 2021) https://www.theguardian.com/australia-news/2021/jul/21/new-hope-mining-company-referred-to-asic-accused-of-misleading-investors-over-future-of-coal. [7] Reinhold Schmidt, Evidence to the Inquiry into the Prudential Regulation of Investment in Australia’s Export Industries (2021) https://parlinfo.aph.gov.au/parlInfo/download/committees/commjnt/6c415677-0375-40f6-b04b-75346670a4f6/toc_pdf/Joint%20Standing%20Committee%20on%20Trade%20and%20Investment%20Growth_2021_06_25_8907.pdf;fileType=application%2Fpdf#search=%22committees/commjnt/6c415677-0375-40f6-b04b-75346670a4f6/0000%22 p 38. Sincerely,
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On behalf of @Market_Forces, @EDOLawyers wrote to @ASICmedia requesting an investigation into New Hope's potentially misleading/deceptive statements.
Make sure @ANZ_AU, @macquariebank & @NAB rule out funding companies expanding #climate-wrecking #coal!https://t.co/yTJ9KKzY25
— Market Forces (@market_forces) July 21, 2021