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Whitehaven next in frame for investor pressure on climate

22 October 2018

Market Forces in the media

Op-ed by Julien Vincent, executive director Market Forces

Sydney Morning Herald/The Age, 19 October 2018

Next week investors will get the opportunity to vote on whether an ASX100 company that is custodian of their money should align its strategy with the Paris Agreement on climate change, which aims to keep us to 1.5 degrees.

That company is Whitehaven Coal, Australia’s largest pure-play coal miner. And to make a gross understatement: Whitehaven’s strategy isn’t in line with this goal.

Market Forces has helped coordinate a resolution from over 100 Whitehaven shareholders to be put to the meeting asking the company to disclose the risks it faces from both the impacts of, and efforts to reduce, climate change.

It also expresses the opinion that the company should align its strategy with the goals of the Paris Agreement. Why might that matter to you? Because if you have a superannuation fund or shares in the ASX100, you’re likely invested in Whitehaven and exposed to its climate-related financial risks.

Earlier this month, under pressure from investors, Whitehaven told the market it was prepared to budge on climate change risk disclosure but, in the same document, made clear its vision for the future was more coal.

Whitehaven justifies this by citing the New Policies Scenario of the International Energy Agency (IEA), which states coal use in South East Asia could more than double by 2040. It’s also a scenario in which global warming reaches 2.7ºC by 2100, a flagrant breach of the Paris Agreement that has now been ratified by 181 countries.

The IPCCs analysis on coal is in stark contrast on this matter. It requires at least a 2/3 reduction in coal power generation by 2030 and its virtual elimination by 2050.

The good news is that the New Policies Scenario already looks unrealistic. Moves from some areas of industry and finance are outpacing political action.

Two of South Korea’s biggest pension funds last week announced plans to divest from coal and the province of South Chungcheong joined the Powering Past Coal Alliance, committing to bring forward the retirements of 14 coal power units by 2026.

Last month, Standard Chartered bank ruled out financing all new coal power plants and expansions anywhere in the world. This is a dramatic turnaround from a bank that had helped enable over 10 Gigawatts of coal power so far this decade and is influential in Southeast Asian power markets.

In Japan this year, Daiichi Life Insurance ended project financing for all new overseas coal-fired power projects, while Nippon Life and Sumitomo Mitsui Trust Bank both ruled out finance to new coal power stations full stop.

Given Whitehaven’s rose-tinted view of coal in Asia thanks to the New Policies Scenario, these developments should be a huge deal, and underscore the importance of the investor vote later this month.

The question now is what will investors do? They’re voting with our money and we need investors like our superannuation funds to put our money where their mouths are on climate risk management.

The call to action from these resolutions is something every company should receive and that many are already heeding. And not only out of taking moral action, but also in terms of pure financial common sense.

The CEO of Japanese giant Marubeni, previously one of the world’s largest coal developers, said earlier this month that coal no longer makes business sense when compared to the growth of renewable energy.

Investors have lent their weight to a raft of initiatives, statements of support for the Paris Agreement, and calls for governments to act on climate. Investors have also successfully pushed for change around the relationship of companies with industry bodies over divergent statements on climate change as evidenced by statements from Origin Energy and Westpac this week.

But we’re yet to see investors make clear, public demands that the companies they own bring their strategies in line with meeting the outcomes of Paris.

The future Whitehaven is working towards and meeting the outcomes of the Paris Agreement differ by barely one degree in terms of global warming. But that difference means we can either keep Whitehaven’s current growth plans or keep the Great Barrier Reef. Investors, which do you think is in our best interests?

if you have a superannuation fund or shares in the ASX100, you’re likely invested in Whitehaven and exposed to its climate-related financial risks.