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ANU acknowledges fossil fuel industry is a risky investment

Friday, 1 April 2016

Today Luke Kemp, on behalf of Fossil Free ANU, presented to ANU Council with a Staff Open Letter of over 450 signatures in support of divestment from the fossil fuel industry.

In response, ANU Vice Chancellor Brian Schmidt outlined how the ANU was managing the risk associated with investing in the fossil fuel industry, and how it has taken action to limit carbon exposure.

Schmidt announced that the ANU would ‘weight the portfolio to reduce carbon intensity… to ensure that it is at least 25 per cent lower than the ASX 200’

Schmidt stated: This was done to more efficiently decrease the University’s investment exposure to CO2 intensive industries without increasing the University’s exposure to volatility in the equities market.

The University will continue to evaluate the methods available to simultaneously meet its obligations to achieve a high and stable return on its investment portfolio and decrease its CO2 intensity’.

Fossil Free Spokesperson, Luke Kemp, welcomed the move but stressed that, “as with the ANU’s partial divestment in 2014, it is not enough.”

Kemp said: ‘The ANU’s move to decrease the carbon intensity of their investments is a welcome, positive step forward. It demonstrates that the ANU clearly recognises carbon exposure, and the risks of investing in fossil fuel companies. This sends a signal to other universities about the importance of considering the financial risk of investing in a carbon bubble.’

‘However, there is  a world of difference between minimising risk and showing leadership. Climate change is a moral issue that requires urgent, decisive action. By not fully divesting, the ANU today missed an opportunity to show true climate leadership. We implore ANU to fully divest urgently, as we cannot wait any longer.’

In their presentation, Fossil Free ANU announced that if the ANU does not take leadership on climate change then they will be forced to take further leadership themselves.

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Letter to ANU Council

Dear ANU Council,

Students for a Fossil Free ANU is writing to inform you that our campaign for leadership on fossil fuel investments continues this year, and to request that you place this issue back on Council’s agenda. Specifically, we request that the topic of the fossil fuel divestment is placed onto the agenda and discussed at the Council Meeting on April 1st 2016. At this meeting, we urge the ANU to commit to full fossil fuel divestment.

We first note the progress made so far, before outlining our reasons for taking further action.

Progress So Far

We commend ANU on its progress so far on fossil fuel divestment – ANU has a socially responsible investment policy, has divested from three fossil fuel companies as part of a broader ethical investment decision, and has recently introduced a carbon ‘tilt’ to reduce the carbon intensity of ANU’s domestic equities by 25% as compared to the ASX200.

ANU’s 2014 partial divestment lead to disproportionate controversy, yet the University stood strong with the community behind them. This support is confirmed by national polling and polling of ANU staff completed by ANU students. The ANU community wants ANU to be a leader. As former Vice Chancellor Ian Young noted, ANU’s decision to divest turned out to be an act of national leadership.

The Need for Full Divestment

Since that 2014 decision, the divestment movement has since grown substantially. The Australian recently listed the divestment movement as 20th most influential force in Higher Education, foreshadowing the coming divestment “tsunami” in the wake of the Paris Agreement.1 Asset managers holding $3.4 trillion have now made some form of divestment2 and AXA predicts continued growth this year.

In this context, it is remarkable how little action we have seen from Australia’s universities. ANU and the University of Sydney have both made modest divestment and carbon reduction pledges, while Swinburne is considering divestment but is yet to take any action.

We support ANU’s right to make such a decision and support these first steps towards responsible investing, but we continue to have concerns about the process, transparency and scope of the 2014 divestment decision and carbon tilt announcement. While the level of attention suited our goals, we doubt the episode would have attracted such criticism had the matter been approached differently. In particular, the 2014 decision was not framed specifically to take climate leadership, and did not intend to single out the fossil fuel industry, despite being interpreted as such. We note the contrasting reaction to the August 2015 decision of the ACT Government to divest, which was relatively uncontroversial and indicates wide acceptance of divestment within the ACT community.

Owing to the media attention ANU received in 2014, many people already believe ANU has divested from fossil fuels. Such individuals are deeply disappointed to learn that the reality is that ANU continues to invest in companies holding some of the largest carbon reserves in the world. ANU can only be a true climate leader if we fully divest from fossil fuels.

The University acknowledges that 2014’s divestment decision saved them millions of dollars, just as ANU’s earlier divestment from Metgasco also saved ANU millions of dollars. One recent study found that if the ANU had divested from fossil fuels in full when initially asked, it would be more than US$50 million ahead of its current position.3 With this knowledge, ANU can no longer claim to be fulfilling its fiduciary duty without fully divesting from fossil fuels.

We hope that Council recognises the moral and financial sense of divesting, and makes ANU the first Australian university to be a true climate leader.

 

In anticipation,

Fossil Free ANU

 

1 The Australian, 2015. http://www.theaustralian.com.au/news/special-features/higher-education-30-most-influential-2016/news-story/32518529239a8924d6da4f29919ca349
2 Nussbaum, 2015. Bloomberg, http://www.bloomberg.com/news/articles/2015-12-02/fossil-fuel-divestment-tops-3-4-trillion-mark-activists-say
3Heaps, 2015. Corporate Knights, http://www.corporateknights.com/channels/responsible-investing/fossil-fuel-investments-cost-major-funds-billions-14476536/

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ANU partial fossil fuel divestment had “significant positive financial impact”

November 17th, Canberra

Partially divesting ANU’s portfolio from fossil fuels has already had a positive financial impact, according to Chris Grange, Executive Director of the ANU.

At a Budget Forum on November 13th Mr Grange, whose role includes coordinating the overall University budget, happily acknowledged that the partial divestment saved them millions.

“The decision to divest had a significant positive financial impact due largely to the major drops in the share prices of the seven companies from which we divested, post our divestment decision,” Mr Grange said.

“The University is currently reconfiguring our Australian equities portfolio and we are introducing a tilt that is aimed to reduce the carbon footprint of our share portfolio.”

This tilt on its Australian equities portfolio will reduce its carbon intensity by 25% compared to the ASX200.

“For Mr Grange to say that is a huge win for us; it’s a really good outcome,” said Fossil Free ANU spokeswoman Miriam Adams-Schimminger. “Fossil fuels are increasingly becoming stranded assets and bad investments, and we’ve been saying that all along. It is great that the University is seeing it too.”

However, new research has determined that ANU has lost over $53m in the past three years due to their continued investments in fossil fuels.

Carried out by Coperate Knights, South Pole, and 350.org, the analysis shows that  global investors lost billions of dollars over the past three years by remaining invested in fossil fuel companies.

“We’re not surprised by this finding. All the evidence says that investing in fossil fuels is not only bad for the climate, but that it’s bad for returns,” Ms Adams-Schimminger said. “Fully divesting from fossil fuels is really in ANU’s best interest, both financially and as a world leading university.”

In October last year ANU divested from two fossil fuel companies and five resource companies as part of its Socially Responsible Investment policy. The decision was widely supported by the ANU community but sparked a media furor that drew the ire of commentators and Cabinet Ministers.

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