Divestment heats up

The Australian National University has divested itself from some – but not all – resource stocks.

Just last week, the Australian National University announced it would sell shares in seven companies: Santos, Newcrest Mining, Iluka Resources, Sandfire Resources, Oil Search, Independence Group and Sirius.

The seven companies represent $16 million, or 1 per cent, of ANU’s estimated $1 billion of investment holdings.

They’re all resources companies, but many aren’t fossil fuel related.

There might be some good reason for that – for example, their portfolio could have been over-weight in resource stocks, or they may have thought those particular stocks had poor prospects going forward, or the ANU may have needed the cash for some other investment or expenditure. Lots of good reasons.

But, no. The ANU has adopted a socially responsible investment strategy.

Vice-chancellor Ian Young said CAER had rated ANU’s $1 billion ­portfolio using socially responsible ­filters, such as environmental ­performance, corporate governance and indigenous affairs.

“We think it’s an objective approach to looking at what are challenging issues,” he said.

The seven blacklisted companies received the lowest rating on a scale of one to five.

That is a bit strange – because it isn’t clear that those seven firms are poor corporate citizens. Quite the contrary.

Iluka Resources and Santos have won Premiers’ awards and other gongs for environmental rehabilitation, ­indigenous employment and ­engagement. One blacklisted company,Sirius Resources, has been feted by ­Aboriginal leaders in Western ­Australia for its engagement with ­indigenous people near its Nova nickel deposit – and it isn’t even mining yet.

Nickel is used in lithium batteries used to power electric cars and store renewable energy.

Mark Bennett, chief executive of ­Sirius Resources, was surprised to be on the blacklist.

The company had involved local Aborigines in ­environmental assessments and gone the extra mile to show the world a new mining project could be done “right” from the start.

I suspect this next bit is going to cause some trouble.

None of the blacklisted companies were contacted by ANU or CAER, the consultants ANU used for the decision, or invited to put their case.

In fact:

One of the companies blacklisted by Australian National University’s ­­$1 billion investment fund says it will pursue its legal rights against the consultants who advised the university on the move.

“We reserve all of our rights and we’ll be seeking legal advice and to the extent we can we’ll pursue the matter formally and we’ll be looking for a full retraction of the negative statements made by any parties in the media because they are misleading, false and untrue,” Mr Simich said.

He was “flabbergasted” that a publicly funded university could take such a decision based on third party research containing multiple errors without contacting the companies concerned.

Fund managers and institutional investors also have to consider their fiduciary duty. As I have argued before having an unbalanced portfolio is a problem.

According to Rice Warner, which looked at a sample of 59 super funds with 90 socially responsible investment options, returns compared to similarly structured conventional funds were as much as 0.73 per cent worse over three years. Costs were also around 30 basis points higher. They found that a 35-year-old earning $75,000 who switched 10 years ago to a socially responsible fund would now be $3700 behind a conventional fund, with that figure rising to $68,000 by retirement.

The figures were based on returns until June 2013 and don’t capture the impact of falling coal prices on share valuations in the subsequent 12 months.

REDUCED DIVERSIFICATION, MORE VOLATILITY
Rice Warner argues that attempting to remove coal investments from super funds could lead to unbalanced portfolios, with reduced diversification that might be more volatile.

“Most fossil fuel production is carried out by diversified companies that have other mining interests and also interests outside mining,” the report says. “Divestment from the fossil fuel elements of these companies cannot be accomplished without divestment from the other elements too.”

All this before we even think about the fact that the ANU is making investment decision that will undermine the performance of its investment portfolio and increase its reliance on hand-outs from the taxpayer. It isn’t just the companies themselves that should be asking for a please explain. Treasurer Joe Hockey and Education Minister Christopher Pyne should be asking for an explanation too.

As Raymond de Silva Rosa, Professor of Finance at UWA, wrote in the AFR today:

If the ANU feels a pressing need to behave like an expert with an opinion on all the world’s problems, it would be far more fitting for the university to organise forums and conferences where many voices may be heard on this issue rather being hostage to the strident few.

An apology to those firms whose reputation it has traduced without giving them the opportunity to present their case is also something we should hope for.

Remember this isn’t a case of a private investor selling stocks to suit their risk-return profile or preferences. This is an overtly political statement from a public institution. Worse this is an Australian public institution working with a foreign campaign to undermine and sabotage the Australian economy and the livelihoods of those many individual Australians who are dependent on the mining industry.

This entry was posted in Divestment, Education. Bookmark the permalink.

22 Responses to Divestment heats up

  1. Ant

    I’m sorry, but the last time I checked the ANU accommodates itself in buildings, is hooked up to modern utilities and its staff use modern means of transport.

    In other words, its physical existence is 100% reliant on primary resources and fossil fuels.

    Or maybe they’re working their way towards full divestment from all of these things, eventually moving into caves and bark humpies, burning wombat dung and getting around on donkeys.

    Or maybe they’re just bloody hypocritical idiots.

  2. eb

    Academics! Dumb as a box of rocks!

  3. pete m

    Sorry for the capital letters to come, I canna hold it back.

    WHAT THE FUCK IS THE ANU DOING HOLDING 1 BILLION IN FUNDS?

    Ok, got that off my chest.

    Is it not a public university?

    Is it not their first obligation to put the funds given to it by the public in use immediately for the good of their current students?

    I can understand if they reserve a few dollars (say 1 or 2 hundred mil) for future building projects etc, but 1 BILLION is a shitload of reserves for a PUBLIC body.

  4. Johno

    Look on the bright side. If the ANU and other left wing organisation continue to demonise these companies on purely irrational grounds, their share prices are likely to fall below why thy should be on purely rational grounds. In time, most people will see through the Greens BS and the share price should rise to its rational level.

    This means rational people who don’t follow Green BS will be able the snap up a bargain with the potential for a nice return. The good and just get rewarded and the dumb and foolish are punished. Win win all round, although, a bit unfair on the companies involved.

  5. Token

    Remember this isn’t a case of a private investor selling stocks to suit their risk-return profile or preferences. This is an overtly political statement from a public institution.

    Looks like people failing in their fiduciary duties.

    A government with courage would remind the responsible parties of the personal costs are exposing themselves to.

  6. Fred Lenin

    Make them sell all their shares,to replace tge money we wont be giving them. You hardly need Charity when you have one billion invested,do you?

  7. Des Deskperson

    Here is the CAER ‘team’:

    http://www.caer.org.au/team.html

    It’s interesting that several of them have had previous close educational and professional links with the ANU.

  8. gabrianga

    Contrary to the gloom and despair for the “socially conscious” at ANU ?

    The Western Research Institute in Bathurst recently completed an updated economic impact
    assessment for Newcrest’s Cadia Valley Operations.

    It estimated that last financial year Cadia’s impact onthe region was:

    1. The largest employer in the Central West of NSW creating 2,430 full time equivalent jobs, which represents 6.5 percent of total full time equivalent employment in the region
    $210 million in household income, representing 9.2 percent of total regional household
    income.

    2.Creating $1.5 billion in output – the value of goods and services attributable to Cadia.

    Cadia Valley has paid more than $145 million in mineral royalties and $32 million in payroll tax
    to the NSW Government, and around $12 million in rates to local government over the last five
    years.

    We also support a wide range of community programs and activities every year, often in long
    term partnerships with community organisations, including:

    1. The Orange Local Aboriginal Land Council which is establishing viable commercial
    enterprises for the local aboriginal community

    2.The Smith Family Learning for Life Program which provides scholarships to more than
    260 students in the local region aimed at breaking the cycle of disadvantage
    ?

    The Centroc Beyond the Range initiative which attracts medical specialists and general
    practitioners to the Orange region.

    We have also provided seed funding for the establishment of key community infrastructure such
    as the Orange Regional Museum, an extension to the Orange Airport runway, Orange Ronald
    McDonald House and the Orange Cancer Carewest Lodge.

    Suggest all public funding to ANU be stopped immediately and let them live off new “investments”

  9. Rabz

    Until these arrogant, pompous twats are held accountable for the consequences of such hypocritical posturing, it will continue unabated.

    BTW, what “socially responsible investments” are these self proclaimed geniuses now likely to make?

  10. Rodney

    Perhaps the ANU would knock back money from the Govt tainted as it is by taxes collected from resource companies.

  11. cuckoo

    Radio National Breakfast were gloating over a similar story this morning.

  12. mundi

    Why are they holding $1billion? do they use investment profits for operating costs?

    Can abbott ask for it back? didn’t the government give them a $1b endowment?

  13. Mark from Melbourne

    Ignorant as I am of the University sector, what in God’s Green Earth does the ANU have a billion dollar investment fund for?

    I assume this is bequests or some such… but a billion bucks seems kinda high for what is a second string uni in a provincial backwater…

  14. You only have to spend 10 minutes checking share price charts for “Green” ASX companies and you see a lot of less than stellar investments.
    As an example, ANU was in on the founding of Geodynamics the geothermal power hopeful – not sure if they still have a holding – I wonder how that panned out for ANU.
    With the RET scheme under pressure from the Abbott Govt you might imagine that renewables and Green schemes would be a sector not to jump into right now.
    Just today I saw this list of “Green” stocks on HotCopper and flicked up the charts – I think there are 51 stocks – 40 I marked as weak – meaning the chart showed an investment from post the GFC could be a loser. It was a quick run through – here is the list –
    WASTE
    SGM Sims Metal Management Ltd OK
    TPI Transpacific Industries poor
    TOX Tox Free Solutions OK
    NOE Novarise Renewable Resources Ltd wk
    ANQ AnaeCo wk
    PPY Papyrus Australia wk
    RCM Reclaim Ind wk
    INL Intec Ltd wk
    SOLAR
    SLX Sylex Systems wk
    DYE Dyesol wk
    QTM Quantum Energy wk
    SOO Solco wk
    EVM EnviroMission poor
    WATER
    PHK Phoslock Water Solutions wk
    CLQ CleanTeQ wk
    WIND
    IFN Infigen Energy wk
    TSI Transfield Services Infrastructure Fund TSE ? wk
    BIOGAS
    ENE Energy Developments OK
    PEA Pacific Energy OK
    BIOFUEL
    MBT Mission NewEnergy wk
    ARW Australian Renewable Fuels wk
    SWW Solverdi WordWide Limited wk
    JAT Jatoil wk
    GREEN BUILDING AND BIOMATERIALS
    GXY Galaxy Resources wk
    ORE Orocobre OK
    NAN Nanosonics OK
    GAP Gale Pacific wk
    PPG Pro-Pac Packaging poor
    BLG Bluglass wk
    CNN Cardia BioPlastics wk
    ERJ Enerji Ltd wk
    TTI Traffic Technologies wk
    TRANSPORT TECHNOLOGIES
    CFU Ceramic Fuel Cells wk
    VMT Vmoto OK
    OEC Orbital Corp wk
    EDE Eden Energy wk
    GEOTHERMAL
    GDY Geodynamics wk
    PTR Petratherm wk
    HRL Hot Rock Ltd wk
    GER Greenearth Energy wk
    GRK Green Rock wk
    ENVIRONMENT
    COF Coffey Environments wk
    AEI Aeris Tech wk
    EGL Environmental Group wk
    PEH Pacific Environment wk
    CARBON
    COZ CO2 Group wk
    CCF Carbon Conscious wk
    WAVE / OCEAN ENERGY
    CWE Carnegie Wave Energy wk
    OTHER
    AEF Australian Ethical Investment OK
    BPO BioProspect wk
    SOI Soil Sub Technologies wk

  15. Tim Neilson

    Johno
    #1471499, posted on October 8, 2014 at 4:21 pm
    I’d like to see someone run a “socially irresponsible fund”, based on just that theory – that the share prices of tobacco, coal, uranium etc. were artificially low because of the luvvies and thus that the long term yield of investing them should outperform the market generally.
    Fosters’ shares – the more VB you drink, the more your dividends. It’s a win-win.

  16. Grigory M

    Why are they holding $1billion? do they use investment profits for operating costs?

    From the ANU 2013 Annual Report:

    A single anonymous donor showed their support
    for the humanities by pledging $1 million to enhance
    language studies at ANU.

    Universities, Major Libraries, other Cultural Institutions, Hospital and Health Research Organisations all get lots of bequests and donations – quite often they are conditional and can only be used for a specified purpose. It doesn’t take long for them to accumulate.

  17. gabrianga

    Business Insider runs with an “advisory video seemingly produced by Ban-Ki and the “Chosen One”.

    A warning of the 5 major catastrophes about to hit Planet Earth within the next few years linked to Global Warming (of course)

    Suggest Peter Colgan , Australian Editor, has just destroyed what little faith you could place in his new version of “Punch”

  18. H B Bear

    Here is the CAER ‘team’:

    The Head of Research looks like a tadpole collector. I wouldn’t let them hold my lunch money.

  19. Blogstrop

    The ACT is a whited sepulchre of leftist loonery. The ANU is now being governed with the same large dollop of PC idiocy that has infected the ACT government for years. When the RET is squashed their alternative investments will plummet.

  20. Jessie

    This direction of divestment will have serious consequences for the women, children and teenagers in remote populations. Thirty years of ANU academia, allegiance to ‘elders’ and monopoly policy advice have ruled these populations.

    Result of their academic experiment = shocking and appalling situation.

    Written 2001 and re-presented over a decade as hybrid [carbon] economy indigenous caper anu
    Appears many papers now unavailable on quick search.

    Part of the problem is generated by inadequate intellectual approaches to development dilemmas on Aboriginal land which are encapsulated in the false question: how can development based on market engagement be delivered to communities that are remote? Part of the answer, I will argue, is to question the premise upon which it is based, which is that the only type of economy worth the
    name is the market economy. In arguing for the existence and validity of the hybrid economy I will suggest that it can only be properly understood through a hybrid intellectual framework that combines science, social sciences and Indigenous knowledge systems

    .
    source: https://digitalcollections.anu.edu.au/bitstream/1885/40104/2/2001_DP226.pdf

  21. Bill

    That’s a superb portfolio wazsah.

    A sizeable portion of those dogs were frauds from day one. (A few years ago it was very easy to float any sustainable/renewal/cleantech drivel).

Comments are closed.