Former Treasurer Peter Costello has previously said it would be “a very strange thing” for the nation’s sovereign wealth fund to divest from fossil fuels. Dr John Hewson’s not so sure.
Former Liberal leader Dr John Hewson has launched a scathing attack on Peter Costello for being “wilfully blind to the risks of climate change” in his management of Australia’s massive sovereign wealth fund, even accusing the Howard-era Treasurer of “a clear breach of fiduciary duty”.
Dr Hewson is the Chair of the Asset Owners Disclosure Project (AODP), a non-profit which ranks the top 1,000 asset owners for their exposure to investments that risk the climate and, increasingly, their returns.
In a written statement released this week, he said Costello was effectively robbing Peter to pay Paul by underestimating the risk posed to the planet and fossil fuel stocks by increasing action on the part of governments and institutions which are working to tackle climate change.
Costello is the Chair of the Board of Guardians, which makes investment decisions on behalf of the Fund. As such, he has borne the brunt of Hewson’s wrath at the apparent indifference to the risk to the $117 billion Australian Future Fund, tasked with securing the nation’s intergenerational wealth.
The AODP filed a freedom of information request for any mention of ‘climate’ (change) in the meetings of the Board of Guardians, which makes investment decisions on behalf of the Fund.
It says its enquiry turned up no mention.
“Australia’s future fund must be governed by guardians who can see and help make the future, which will inevitably be one built around clean energy and renewables,” Hewson said.
“It is ludicrous that after so much action elsewhere, the Future Fund hasn’t even discussed the issue, let alone designed and implemented policies like the leading funds have,” he said.
“There are millions of people working on this transition already, and a few vested interests such as Costello allowing their ideology to cloud their judgement.”
The guardians get defensive
A spokesperson for the Board of Guardians defended its investment decisions, noting that “the Future Fund has an environmental, social and governance policy that applies to all environmental issues, including climate change”.
However the spokesperson refused to comment on the Fund’s exposure to fossil fuels, or whether it sees coal as a risky investment, while maintaining that “the Asset Owners Disclosure Project is simply wrong to claim the Board does not consider climate change”.
“The [governance]policy has been explained many times: in Senate Estimates hearings, in our annual reports, in papers on our website and in media briefings,” the spokesperson said.
As part of a campaign calling for divestment, climate advocacy group 350.org has been trying to pin down how much of the Fund is invested in fossil fuels, but Campaign Director Charlie Wood said it’s difficult to be sure.
“The Fund’s 2013-14 annual report says that ‘energy’ accounts for 9 per cent of their listed equities,” Wood said. “Some of this might be in renewable energy companies but the bulk is likely to be fossil fuels,” she said.
“As at June 2014, their listed equities holdings were $38.4 billion; fossil fuel equity holdings are probably around $3.4 billion, or a little under 3 per cent of Future Fund assets.”
Although it seems a relatively small proportion of the Fund, there’s a chance the Board of Guardians could be caught in the march of capital out of fossil fuels – more than $2.6 trillion according to Bloomberg – as the global divestment movement picks up speed and influential institutions get on board.
Perhaps most notably, the Norwegian parliament voted in June to shift the remaining coal investments out of the country’s $900 billion sovereign wealth fund, and Hewson noted that “the bastions and leaders of global finance are now banging the drum to take urgent and early action”.
“Look at the list of institutions and people calling for an urgent low carbon transition, [they’re] not exactly left wing hippies are they,” Hewson said.
He cited former head of the US Treasury, Hank Paulson, and Governor of the Bank of England Board, Mark Carney as key voices speaking out against investment in dirty energy.
“While Costello and his fellow guardians probably chuckle about greenies and tree huggers, in the real world climate change is now an economic and financial issue,” Hewson said.
“We need a Future Fund that is in touch with the future, not the past, and Future Fund Chairman Peter Costello has proved again that he is wilfully blind to the risks of climate change and the momentum of what is going on around the world to fix it.”
Costello has previously said it would be “extraordinary” for the Future Fund to pull out of investments in coal, oil or gas, because they’re “very, very important industries to Australia”.
The contrast with Hewson couldn’t be starker. He said “it seems a clear breach of fiduciary duty” that the Board of Guardians has apparently never discussed climate change at its meetings.
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