The Norwegian government’s decision to tighten the Government Pension Fund Global’s (GPFG) coal exclusion criteria will see the world’s richest sovereign wealth fund withdraw a combined AU$3 billion from AGL, BHP and South32.
The announcement comes at a particularly bad time for AGL, just days after the company’s share price fell significantly following news of an ongoing outage at its Loy Yang A power station. The aging Loy Yang A plant runs on highly polluting brown coal – and, despite the latest climate science telling us Loy Yang needs to be closed down by 2030 in order to meet the goals of the Paris Agreement, AGL plans to keep it operating until 2048.
A growing trend
Australian-based AGL, BHP and South32 are among eight companies impacted by GPFG’s new $8 billion coal divestment decision. Anglo American and Glencore, which both have major coal mining operations in Australia, also face divestment.
These companies join a growing list of fossil fuel players that have been blacklisted by GPFG. The fund’s first coal exclusion criteria were announced in 2015, leading to some $6.5 billion being withdrawn from companies that derive at least 30% revenue or generate more than 30% power from coal.
This latest GPFG divestment decision also confirmed plans announced in March to dump investments in 134 oil and gas companies. The March announcement impacted Australian companies including Woodside, Santos, Oil Search, Beach Energy, Caltex, Horizon Oil, Karoon Energy, Cooper Energy and Senex Energy, and saw a significant drop to oil and gas stocks on the Australian sharemarket.
Do these company names sound familiar? Well you may have seen them named and shamed in Market Forces’ Out of Line, Out of Time report earlier this year. The report recommended superannuation funds divest from 21 companies in the ASX300, as they are actively undermining the climate goals of the Paris Agreement by expanding the scale of the fossil fuel industry and basing their business plans on scenarios that would doom Paris to failure.
Three other companies – AGL, BHP and Origin – were found to be acting similarly, but had shown progress towards bringing their business into line with the Paris climate goals. These companies were given a year to act to get themselves off the divestment list.
The writing’s on the wall
It seems the Norwegian Sovereign Wealth fund’s patience has run out. The message from the $1.5 trillion fund is clear: there is no future in fossil fuel investments.
And that’s a message that needs to be heard by Australia’s $2.7 trillion superannuation industry.
To date, just three of the country’s 50 largest super funds have any sort of fund-wide fossil fuel exclusion policy:
- Local Government Super excludes investments in companies deriving more than a third of revenue from coal mining, tar sands, or coal-fired power.
- Vision Super announced in November 2018 it would be divesting from companies that generate more than 25% of revenue from thermal coal and tar sands.
- Hesta’s core option has, since 2014, excluded new investments in companies that derive 15% of revenue or net value from thermal coal exploration or development of new or expansionary thermal coal mines.
While these policies are all miles behind the action taken by GPFG, they are ahead of the pack amongst Australia’s biggest super funds.
GPIF has shown the kind action that’s required of investors wanting to align their portfolios with the goal of limiting global warming to 1.5°C. Australian investors, including our super funds, must step up and immediately divest from all companies that are actively undermining the Paris climate goals.