Super funds often say they prefer engaging with fossil fuel companies to bring their businesses into line with a low-carbon future, rather than simply divesting. But Market Forces’ assessment of 25 major Australian fossil fuel companies has found the vast majority aren’t doing enough to warrant engagement.

Almost all Australian listed fossil fuel companies are failing to positively address the Oxford Martin School’s ‘Working Principles for Investment in Fossil Fuels’, giving investors clear justification for divestment.

The Oxford Martin Principles provide investors with “terms of engagement,” by which they can measure fossil fuel companies’ preparedness to transition to a low-carbon economy:

    • Science: Does the company accept the science that climate stabilisation (at any temperature increase) requires net zero carbon dioxide emissions?
    • Strategy: During the transition to net zero, does the company have a strategy to limit future committed cumulative carbon dioxide emissions?
    • Milestones and Metrics: Has the company provided milestones and metrics to allow investors to monitor their progress in implementing their transition plan?

Positive responses to the Principles provide investors with “a case for remaining engaged”. However, fossil fuel companies’ failure to meet the Principles’ minimum standards suggests they are not recognising and planning for the transition risks posed by the Paris Agreement.

Just one company – AGL Energy – addresses all three Principles and could be considered worthy of engagement. But as the country’s largest greenhouse gas emitter and with plans to keep their coal power stations open beyond 2050, there is plenty of work for investors to do in order to bring AGL into line.

Company Sector Science Strategy Milestones & Metrics Material Business Risk CDP Participant
AGL Energy Ltd Utilities
APA Group Utilities
AWE Ltd Energy
Beach Energy Ltd Utilities
BHP Billiton Ltd Materials
Caltex Australia Ltd Energy
Duet Group Utilities
Energy World Corporation Utilities
ERM Power Ltd Utilities
FAR Ltd Energy
Karoon Gas Australia Ltd Energy
Liquefied Natural Gas Ltd Energy
Macquarie Group Ltd Financials
Oil Search Ltd Energy
Origin Energy Energy
Rio Tinto Ltd Materials
Santos Ltd Energy
Senex Energy Ltd Energy
Seven Group Holdings Ltd Industrials
Sino Gas & Energy Holdings Ltd Energy
South32 Ltd Materials
Wesfarmers Ltd Consumer Staples
Whitehaven Coal Ltd Energy
Woodside Petroleum Ltd Energy
WorleyParsons Ltd Energy
Does your super fund invest in these companies?

Key findings

      • Only one of the 25 companies assessed positively address each of the Oxford Martin Principles – AGL Energy;
      • Three of the 25 companies assessed partially address the three principles – BHP Billiton, Rio Tinto and South32;
      • Ten of the 25 companies assessed (40%) fail to acknowledge the science of climate change at all, including index heavyweights Seven Group Holdings and WorleyParsons;
      • None of the fourteen companies assessed in the ASX300 Energy sector has a strategy to reduce their emissions in the long-term;
      • Just six of the 25 companies assessed (24%) acknowledge climate change as a material business risk;
      • Nine of the 25 companies assessed (36%) do not make submissions to the CDP (Carbon Disclosure Project).

The lack of progress by Australian companies in the year since the Paris Agreement is likely due to a number of factors: a lack of policy certainty in Australia; a lack of guidance from regulators; and the failure of institutional investors – like our super funds – to exert their influence over companies.

We need out funds to show meaningful change as a result of their engagement, otherwise divestment is the only option.

Recommendations

In the current absence of regulatory guidance on climate risk disclosure, investors must:

      • Implement and disclose a framework and timeframe for active engagement with fossil fuel companies, such as the Oxford Martin Principles;
      • Take punitive measures against companies that fail to fully address the framework, e.g. voting against director elections and/or remuneration reports;
      • Divest from those companies where progress is not forthcoming.

Click here to read our complete analysis of Australia’s fossil fuel companies approach to climate.