The Australian National University Divests; All Hell Breaks Loose

Salem, NY:  Salem Art Works, student housing 9/28/14
Salem, NY: Salem Art Works, student housing 9/28/14

For a university like ours, which is … a major researcher in environment and alternative energy, we need to be able to put our hand on our heart when we talk to our students and to our alumni and to our researchers and be able to say that we’re confident that the sort of companies that we’re investing in are consistent with the broad themes that drive this university.

         So said Vice Chancellor Ian Young, the president of the Australian National University (ANU) on Oct. 8, defending his university’s decision to divest from seven Australian extraction companies.[1]

Consistency – alining portfolio with mission – is one the two main motivations for adopting a socially responsible investment (SRI) policy.  The other is effecting positive social change by altering the norms of acceptable behavior applied to companies and investors.

ANU moved on both fronts.

 ***

           But why is the ANU story significant beyond Australia’s 23.6 million people? Start with the fact Australia is a major coal exporter, particularly to China and Japan.

On Oct. 13, Prime Minister Tony Abbot at the opening of the Caval Ridge Mine in Queensland remarked, ‘Coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future, here in Australia, and right around the world.’ The mine is a joint venture of Mitsubishi and BHP.

Elected in September 2013, the Abbott’s Liberal Party had promised rapid repeal of the Labor government’s proudest climate achievement, the carbon tax. On July 16, it delivered on that promise.

With that very recent triumph, why would Abbott and his supporters bother about ANU?

***

           In their own minds, if not the public’s, Australian fossil fuel and mineral interests have had a tough couple of months.  Though as in Canada, the extraction industries control the federal government, highly visible constituencies have chosen to resist.

On Aug. 26, the Sydney Morning Herald reported, ‘Sydney University creates waves with investment ban on coal’. Six weeks later, ANU made its move.

Important pensions (in Australia, ‘superannuation schemes’ or just ‘supers’), such as the A$5 billion Local Government Super (LGS) and the A$29 billion HESTA committed to divest. Both have played significant roles on social investment issues for a long time.[2]

On Oct. 13, the Australian headlined an article, ‘More Anglicans [sic] dioceses join divestment ranks’. After the national Synod had endorsed divestment in July, the Dioceses of Perth and Canberra took action.

 ***

           On Oct. 6, a counterattack began.  As Responsible Investor (subscription required), my original source, reported, the Minerals Council of Australia released a scathing ‘Analysis of “socially responsible investment” options’, prepared for it by an actuarial firm.

On Oct. 10, the Australian Financial Review (AFR), the national business paper, launched a series of attacking articles (behind pay wall except link) which continued for a week. The series intimated that the research ANU relied on was erroneous, that one of the companies might take legal action….

The first AFR article quoted Australian Treasurer Joe Hockey who took time away from the International Monetary Fund and G20 meetings in Washington to criticise ANU:

            I would suggest they’re removed from the reality of what is helping to drive the Australian economy and create more employment.  Sometimes the view looks different from the lofty rooms of a university.

           On Oct. 15, Lisa Cox reported in the Sydney Morning Herald, the Prime Minister went farther than his Treasurer on ANU’s divestment.

 “Of course they should be free to do what they want but when they make stupid decisions we should be free to criticise them,” Mr Abbott said.

 “Any entity which says that they’re simply not going to invest in energy companies is frankly depriving its members of the benefit of some very good investments.

 “Australia ought to be one of the world’s energy superpowers.”

 Two days after Mr Abbott described coal as being “good for humanity”, the Prime Minister reiterated his view that fossil fuels were part of a future in which Australia “ought to be the world’s affordable energy capital”.

 “That means in the months and years and decades to come, Australia’s energy companies will be a very good investment for people who are sensible enough to see where their opportunities are,” he said.

 ***

Salem, NY:  Salem Art Works students  9/28/14
Salem, NY: Salem Art Works students 9/28/14

In a brief, modulated press release on Oct. 3, ANU had described its process and divestment decision:

           The Council of The Australian National University [like an American board of trustees] has agreed to a proposal by Vice-Chancellor Professor Ian Young AO to commence divestment of stocks in seven companies following an independent review of ANU domestic equities.

           The review, commissioned by the University as part of its Socially Responsible Investment Policy and undertaken by CAER [an Australian ESG research firm], provided Environmental, Social and Governance Ratings on ANU-held domestic stocks.

           As a result of the ratings, the University will divest its holdings in Iluka Resources, Independence Group, Newcrest Mining, Sandfire Resources, Oil Search, Santos and Sirius Resources.[3]

           The Council of the ANU had adopted a socially responsible investment policy earlier this year. The divestment decision was modest, like Stanford University’s, and driven by process.

As both critics and supporters noted, ANU did not divest all its fossil fuel holdings.  According to the Sydney Morning Herald on Oct. 13, ‘While seven resources stocks were dumped, ANU has retained investments in mining groups BHP Billiton and Rio Tinto, as well as in Woodside Petroleum and Wesfarmers.’

‘The shareholdings to be liquidated are worth an estimated $16 million, representing less than 2 per cent of the university’s $1.1 billion portfolio’, Lisa Cox reported on Oct. 15. ANU’s portfolio is a fifth of the Local Government Super’s assets under management, a twenty-seventh of HESTA’s.

So why the outcry directed at ANU?

***

Surveying news from Australia from 54 million feet entails some risk of lost nuance.  But from high on America’s right coast, the reaction to ANU’s divestment seems disproportionate.  Tellingly so.

Universities set norms.  The South Africa divestment movement succeeded in no small part because the struggles over endowment investments in companies doing business there changed first campus then national opinion.

Few colleges divested.  But many minds were changed.  That’s why ANU’s divestment of mineral companies is so threatening.

 Notes

 1.  Vice Chancellor Prof. Ian Young spoke on Oct. 8 on ‘Lateline’, an Australian Broadcasting Company interview show.

2.  Both supers have longstanding commitments to SRI/ESG:  HESTA, LGS.

3.  ANU’s University Council is like an American public university’s board of trustees, but it is not the same. For one thing, ANU’s website says, ‘The Corporate Governance and Risk Office supports the Council and its Committees.’

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