Digging Deeper

Despite the desperate need and global commitment to ditch fossil fuels, our latest report reveals fossil fuel companies are continuing to search for more unburnable carbon. Many are even encouraging exploration through executive bonuses. What’s worse, super funds are voting – with your retirement savings – in favour of these dirty exploration bonuses.

Fifteen Australian-listed companies have spent a combined $12.69 billion on fossil fuel exploration since July 2012. Ten foreign companies spent a further $14.62 billion on exploration in Australia between 2013-2015.

Fossil Fuel Exploration By Australian Companies, 2012-2016 ($AU Millions)
Company AUS INT Total
BHP Billiton Ltd $917 $2,104 $3,021
Woodside Petroleum Ltd $739 $2,746 $3,485
Oil Search Ltd $2,178 $2,178
Santos Ltd $846 $237 $1,083
Karoon Gas Australia Ltd $365 $510 $875
Beach Energy Ltd $512 $72 $584
Rio Tinto Ltd $281 $281
Senex Energy Ltd $236 $235
Origin Energy Ltd $296 $296
AWE Ltd $74 $87 $161
Seven Group Holdings Ltd $47 $72 $119
New Hope Group $106 $106
Sino Gas & Energy Holdings Ltd $95 $95
FAR Ltd $11 $119 $131
Whitehaven Coal Ltd $35 $35
Total $4,464 $8,221 $12,685

 

Click here to read the full Digging Deeper report.

TAKE ACTION

Tell your super fund to stop rewarding climate destruction today!


Rewarding climate destruction

In many cases, exploration is encouraged through executive remuneration packages. There are at least seven ASX-listed companies with known links between executive remuneration and fossil fuel reserves: AWE, FAR Ltd, Karoon Gas, Oil Search, Santos, Senex Energy and Sino Gas & Energy. Other energy companies, including Beach Energy, Woodside Petroleum and Whitehaven Coal, have remuneration structures that may encourage exploration.

At least six international companies with significant Australian operations also have explicit fossil fuel exploration or reserves-based bonus structures: ExxonMobil, Chevron, BP, Murphy Oil, Hess and ConocoPhillips.

Senior executives at the seven Australian companies stand to make a combined $2.02 million in additional bonuses each year if their reserve targets are met.

How Oil Search’s Managing Director Was Rewarded by Super Funds For Climate Destruction
Oil Search's Managing Director Rewarded by Super Funds for Climate Destruction

 

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Super support

Despite their potential influence as significant shareholders, Australia’s super funds are failing to effectively challenge fossil fuel companies’ broken business models. Funds claim engagement is the best way to change the behaviour of companies they invest in, but little evidence is made available to demonstrate the effectiveness of this approach.

Funds have the right to vote on items such as executive remuneration and lobby for perverse incentives like fossil fuel fuel exploration bonuses to be removed from remuneration packages. But the evidence available indicates funds are, either actively or passively, using their members’ money to endorse these dirty bonuses.

Only eighteen of Australia’s 50 largest super funds disclose their complete proxy voting record, making it difficult to determine which funds are genuine ‘active owners.’ Our analysis of twelve Australian super funds’ voting records shows only three voted against any energy company’s remuneration package in the 2015/16 financial year.

These votes were all cast at Santos’ 2016 AGM, which saw significant investor revolt against excessive remuneration during a period of poor performance. So while there are some rare examples of funds voting against remuneration packages in the energy sector, there has not been widespread voting against exploration incentives.

Despite the significant presence of many international companies in the Australian economy, our super funds generally don’t engage with them. Engagement with companies actively exploring and producing fossil fuels in Australia should be an immediate priority for super funds.

Australia’s super funds must have effective engagement policies and practices, and demonstrate how these are being implemented to ensure companies they invest in are compatible with a low carbon future. An obvious step to demonstrate alignment with the goals agreed to in Paris is for funds to reject fossil fuel exploration incentives.

Funds are able to vote because of the retirement savings they manage for their members. They should engage with companies in a way that reflects their members’ views and concerns about climate change.

Super Fund Remuneration Voting Record 2015-2016
Super Fund AWE Ltd FAR Ltd Karoon Gas Australia Ltd Oil Search Ltd Santos Ltd Senex Energy Ltd Sino Gas & Energy Holdings Ltd Woodside Petroleum Ltd
AustralianSuper
FirstState Super
MLC
REST
ANZ OnePath
HESTA
Cbus
HOSTPlus
VicSuper
Care Super
CommBank Super
Catholic Super
Total Rem. Vote 98.97% 84.34% 99.08% 98.04% 88.93% 96.70% 98.75% 72.41%

Recommendations for super funds:

  • Divest from companies that show no willingness to work towards a low-carbon economy.
  • Engage with companies to acknowledge and plan for the transition to a low carbon economy; ensuring executives are incentivised to work towards this transition.
  • Oppose any measures that incentivise additional fossil fuel exploration or other activities incompatible with a 2°C global warming limit.
  • Seek disclosure from companies where remuneration structures are opaque.
  • Disclose complete voting records via easily accessible and searchable documents, in addition to summary reports.

Recommendations for super fund members:

  • Contact your super fund and use your power as a member to encourage them to oppose any executive bonuses that reward fossil fuel exploration or reserve replacement.
  • Ask your fund for complete disclosure: holdings, proxy voting records and their policy for managing climate risk.
  • Insist that your fund divests from companies that have no place in a low-carbon economy.
  • Ensure your fund engages with and votes at company meetings of all energy companies.