Commodities, Finance, Markets

Time for oil and gas to sell their story


First State Super, one of the country’s top 10 funds, advised members in a recent letter that it is divesting from all companies that source 20 per cent of their operating revenue from the production, sale and distribution of coal, oil and gas.

The news surfaced in a story published by the Australian Financial Review today and was touted as “a huge win for the divestment campaign.”

First State Super reportedly bowed to pressure from its members to withdraw from emissions generating industries.

As reported by AFR, the First State Super letter stated that the company would divest from firms that source more than 20 per cent of their operating revenues from the production, sale and distribution of fossil fuels, including thermal and coking coal, oil, natural gas, transmission or transportation for the purpose of exporting and/or non-household use.

The letter continued on to say that it would also exclude companies that explore and or develop fossil fuel reserves, or have a substantial involvement in coal seam gas fracking.

University of Sydney superannuation expert Mike Rafferty said First State Super’s decision was not the first divestment announcement and he does expect more exclusions to come.

“And some funds have been looking at their investment in fossil fuel industries in terms of the risk of holding stranded assets – i.e. Assets which may have downside risk if carbon reduction standards are raised. But it does fir into what seems to be a growing activism of super funds around ethical investments,”? he told Gas Today.

“I think there is growing concern about some of the carbon emitting industries. I think the problem of course is that not all the industry is the same – even a lot of coal is not used for power production but for steal making, but the industry has a big job now to explain to the community how it fits into a future with much tougher carbon emitting standards.”?

While the resources sector is not necessarily high risk for investors and the repeal of the carbon tax and emissions trading scheme has bought the industry time, Mr Rafferty says neither have explicitly altered the fact that the sector is facing much tougher environmental standards.

When asked how the superannuation industry’s divestment decisions might impact the resources sector, Mr Rafferty said it remains early days.

“I think it’s too early to tell with any certainty, and of course much depends on what sort of response we see from the industry. Can it tell a story about itself that it understands the community’s need to see cleaner energy production and can it actually deliver on that story?”?

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