Local fundies are behind their international peers, an activist shareholder group has said, after BlackRock went against Australian investors and supported a call urging AGL Energy to quicken the closure of two coal-fired power stations.
The resolution lodged by the Australasian Centre for Corporate Responsibility (ACCR) requested AGL Energy bring forward the closure dates of its Bayswater and Loy Yang A coal-fired power stations.
Around a fifth (20.4 per cent) of shareholders support the resolution at the company’s annual meeting on Wednesday.
As BlackRock voted in support of the bid, the ACCR reported key Australian investors, super funds and proxy advisers voted against it.
The resolution was based on AGL’s own scenario analysis for the full year, which showed in order to limit global warming to 1.5 degrees Celsius above pre-industrial levels, AGL would have to close its three remaining coal-fired power stations by around 2035.
However Loy Yang A is scheduled to close in 2048, as previously indicated in 2015. AGL has also committed to close Liddell, another coal power station, in 2023.
BlackRock pointed out that AGL’s operational emissions made up around 8 per cent of Australia’s total emissions in 2019/20.
Dan Gocher, director of climate and environment at the ACCR said BlackRock’s support “embarrasses Australian super funds and asset managers who voted against the resolution”.
“It demonstrates an increasing trend that European and US investors are more prepared to take critical action to address climate risk,” Mr Gocher said.
“Lead investor for engagement with AGL in the Climate Action 100+ initiative, Aware Super [formerly known as First State Super] has previously said that ‘climate change clearly poses the most significant risk to investment portfolios over the long term’. Yet Aware Super justified voting against the resolution, claiming it was not commercial to close coal-fired power stations by the mid-2030s.
“Do signatories to the Climate Action 100+ initiative stand for climate action in line with the Paris Agreement, or do they only act when it is commercial to do so?”
He added it is not commercial for coal plants to run beyond the next decade, when they cost more than they earn.
“Far too many Australian investors live in fear of blowback from a government committed to stalling progress on climate action,” Mr Gocher said.
“Increasingly, European and US investors see through the bluster and vote for what is in the best long-term interests of shareholders.”
The ACCR has reported that AGL’s sustaining capital expenditure has more than doubled from $255 million in financial year 2014 to $536 million in FY20. Mr Gocher expects the trend will continue as Bayswater and Loy Yang A age, as the costs of maintenance eat into earnings.
“Investors appear to have missed the point that this allocation of capital expenditure not only affects earnings, but limits AGL’s ability to fund a much quicker transition,” Mr Gocher said.
“The share of coal power generation in the National Electricity Market hit a record low last month. The more renewable energy grows, the more pressure is placed on ageing coal-fired power stations to be more responsive, which they are simply not designed to do.”
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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