The vast majority of listed Australian fossil fuel companies fail to positively address the Oxford Martin School’s ‘Working Principles for Investment in Fossil Fuels’, thereby providing justification for divestment.
The Oxford Martin Principles provide investors with the “terms of engagement” on which they should engage fossil fuel companies: Science, Strategy and, Milestones and Metrics. Positive responses to the three Principles provide investors with “a case for remaining engaged” and reason to “provide capital to support their transition”.
Fossil fuel companies’ failure to address the three Principles suggest they are not recognising and planning for the transition risks posed by the Paris Agreement.
Market Forces’ assessment of 25 listed Australian fossil fuel companies found that:
- 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;
- Not one 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 to exert their influence over companies.
Institutional investors must demonstrate how they are actively managing carbon out of their portfolios, and should use the Oxford Martin Principles to:
- Implement and disclose a framework and timeframe for active engagement with fossil fuel companies;
- Take punitive measures against companies that fail to address the framework, e.g. voting against director elections and/or remuneration reports;
- Divest from those companies where progress is not forthcoming or inadequate.