18 October 2017
A shareholder resolution coordinated by Market Forces, calling for improvements to Origin Energy’s climate risk disclosure received significant support from institutional investors, garnering 13.77% of shareholder votes, despite the board’s opposition. In dollar terms, investors holding approximately $1.8 billion in stock supported the call for greater climate risk disclosure.
Two other resolutions, also coordinated by Market Forces, requesting the company produce a transition plan and measure fugitive methane emissions, received 3.42% and 4.83% support respectively.
The resolutions seemed to have set the tone for the day, as Origin’s annual general meeting (AGM) was dominated by discussion of climate change and energy policy.
Before the meeting had even begun, Origin unexpectedly published their much anticipated scenario analysis, “Resilience of Origin’s Generation Portfolio to a Low Carbon Economy”. The timing of the report was curious, given that scenario analysis is a key tenet of the Financial Stability Board’s Task force on Climate-related Financial Disclosures (TCFD). We have to wonder why the board simply didn’t endorse the shareholder resolution which asked the company to report in accordance with the final TCFD recommendations by 2018.
Origin’s chairman Gordon Cairns and CEO Frank Calabria made much of the company’s “Five Pillars of Decarbonisation”, but the devil is in the detail. Market Forces has taken particular exception to the first two of those pillars: to exit coal-fired power generation by the early 2030s, and to significantly grow renewables in their portfolio.
Origin has committed to closing its only coal-fired power generator – Eraring – by the early 2030s, well beyond its operational life. If Origin’s claims of leadership on climate change were to be taken seriously, then the company would close Eraring well before its 50th year of operation in 2032.
Origin has also committed to build or purchase 25 per cent of energy mix from renewable sources by 2020. At face value, it seems like a promising commitment. However, under questioning from shareholders, CEO Frank Calabria revealed that it would be 25 per cent of capacity, not output. Given that various analysts have suggested that to meet our Paris Agreement commitments, Australia will require 36-38% of output to be renewable by 2020, and 72-75% by 2030, Origin’s commitment seems paltry at best.
The fact remains that Origin has committed to be carbon neutral by 2050, but hasn’t explained to investors how it intends to get there. It has not discussed changes to its capital expenditure or possibly remunerating executives to reduce emissions. The reality is that Origin’s scope 1+2 carbon emissions rose 4% in FY2017 and 47% in the last 5 years. Investors and the community deserve to know when their emissions will begin to decline.
In respect to the measurement of fugitive methane leaks in its Queensland coal seam gas fields, chairman Gordon Cairns trotted out tired lines about “industry specifications” and compliance with the CSIRO. The truth is that the company, nor the industry, know the full extent of the problem. And methane leaks matter, simply because methane’s global warming potential is 86 times greater than carbon dioxide over a 20 year time frame.
Chairman Gordon Cairns’ response to indigenous representatives from the NT – Gadrian Hoosan and Larissa Baldwin – though respectful, was completely dismissive of their concerns about the risks fracking poses to water. In the NT, water is life, and the unconventional gas industry has managed to convince enough governments that fracking is safe, while communities deal with the consequences.
Perhaps the most telling comment of the meeting came from chairman Gordon Cairns in response to a question about political donations. Asked why Origin pays more to attend political functions than its ASX peers, and why it can’t affect policy outside of such events, Mr Cairns said that the state of energy policy today was largely due to their influence, and it was “money well spent”. Most objective observers would describe Australia’s energy policy as nothing short of a train wreck, so for Mr Cairns to take credit for it speaks volumes about the intention of Origin Energy’s political lobbying.