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Revealed: AMP exposed to Adani Abbot Point

11 May 2017

11 May 2017

Major Australian financial services company AMP faced intense questioning from concerned shareholders at the company’s annual general meeting in Sydney today after it was revealed AMP Capital has an existing financing relationship with Adani.

Adani is the Indian energy giant planning to open up Queensland’s Galilee Basin to coal mining with their mammoth Carmichael coal project. The Adani group already owns and operates the Abbot Point coal port, which sits at the edge of the Great Barrier Reef World Heritage Area, sending hundreds of ships full of dirty coal through its precious waters every year.

It’s that very coal port which AMP’s financing arm, AMP Capital, facilitated a US$335 million (AU$420m) loan for in January 2015. With the loan not due to be repaid until 2020, AMP’s ongoing relationship with Adani makes them likely to be approached for finance for the dirty Carmichael coal mine.

In response to shareholder questions at today’s AGM, AMP Chair Catherine Brenner confirmed the company is currently exposed to Adani, and could not categorically rule out any investment in the company’s Carmichael coal project.

A conversation 10 years in the making

AMP seems to have something of a disjointed understanding of the risks climate change poses to assets, both physical – like dirty coal ports – and equities – like the billions of dollars worth of fossil fuels company shares AMP owns.

As early as 2006, AMP’s Head of Investment Strategy recognised the inevitability of emissions-constraining regulation, and the risks it posed to investments. Yet at the company’s 2016 AGM, then Chairman Simon McKeon said the board had never considered what keeping global warming to below 2°C would mean for the company.

Shareholders were glad to hear climate risk addressed in Ms Brenner’s opening address, and that “the economic impacts of climate change” and “stranded assets” were now considered by the board and risk committee.

The question remains though, what on earth was the AMP board doing in the 10 years after its own Chief Economist warned of climate risks to their investments?

Earlier this year, financial system regulator APRA warned of climate risk to investors, recognising that, in order to have a 2 in 3 chance of limiting global warming to below 2 degrees, we will have to restrict future global emissions to around 800 gigatonnes of CO2. An AMP shareholder asked if the board concurred with this analysis, and if so, how AMP Capital’s investment strategy has evolved to address the limitations of the carbon budget.

When asked if the board agreed with APRA’s comments, Ms Brenner restated the company’s broad support for the Paris Agreement and action “along the lines of which Geoff Summerhayes talked about”. Unfortunately, when pressed on what this meant for AMP’s investment strategy, Ms Brenner was only able to point to the continued application of the company’s existing ESG (environmental, social and governance) framework, which does not include an explicit screen on fossil fuel companies.