ESG Updates as at 31 March 2020

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New Zealand and Australian ESG Updates

Oil giant steps away from the Great Australian Bight

A Norwegian oil company, Equinor, is no longer to drill for oil in the Great Australian Bight only months after environmental approvals were gained from the Australian petroleum regulator. The project was controversial, seeing opposition from environmental groups, Indigenous elders and local councils, with tens of thousands of protestors making their voices heard.

Equinor has cited commercial reasons for abandoning the project. Equinor holds eight offshore exploration permits in Western Australia and will continue other activities in Australia.

Bushfire carbon emissions report

The World Wide Fund For Nature has published a report revealing the true extent of carbon emissions from the recent bushfire season. Costs of between $300 million and $1 billion have been estimated in carbon offsets for the Federal and state governments to replace carbon stock lost during the fires.

Around 12 million hectares were estimated between September 2019 and January 2020 releasing about 400-700 million tonnes of carbon - about three-quarters of Australia’s annual anthropogenic emissions. These emissions don’t count towards Australia’s Paris Agreement targets.

NZ Super sees 0.3% extra returns after removing carbon-heavy investments

The NZ Superannuation Fund (NZS) performance saw a boost after carbon-heavy investments were ditched from the portfolio. The New Zealand fund has around NZ$43 billion in funds under management. In real money terms, this amounts to a ‘few hundred million dollars’.

NZS moved its passive global equities holdings to low-carbon settings in 2017, divesting around NZ$700 million in underlying stocks with high carbon reserves or emissions intensity. The divestments did not include local companies, Genesis Energy and NZ Oil & Gas, and investments in BP and Gazprom.

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Global ESG Updates

UBS Group no longer financing Arctic oil, thermal coal or tar sands projects

A statement from UBS Group stated the company will no longer fund new offshore oil projects in the Arctic, thermal coal mines or oil sands on undeveloped land. The Swiss bank is reducing carbon-related industry investment, with energy and utilities sector investments (excluding renewables, water and nuclear) shrunk by 40 per cent in 2019 to just 0.8 per cent exposure. The bank will be examining liquified natural gas and ultra-deepwater drilling projects prior to financing.

UBS has met its three-year sustainable investment goal a year ahead of schedule. Core sustainable investments increased to $488 billion in 2019, doubling from 2017, and making up 13.5 per cent of assets. The bank has also pledged to end financing for coal by 2030 and stop lending to oil and gas companies by 2021 unless there is a transition plan in place in line with the Paris Agreement.

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ESG Research

Poor performing polluters: 22 ASX 300 companies ‘Out of line out of time’ (report)

Activist group Market Forces released a report, Out of line out of time, looking at 22 Australian Stock Exchange-listed companies that, it says, are undermining action of climate change. Many of these companies are invested in by superannuation funds in Australia.

Stocks in question:

  • Woodside Petroleum

  • Santos

  • Origin Energy

  • South32

  • APA Group

  • AGL Energy

  • Oil Search

  • Aurizon Holdings

  • Caltex Australia

  • Worley

  • Seven Group

  • Beach Energy

  • Washington H Soul Pattinson

  • Mineral Resources

  • Whitehaven Coal

  • New Hope

  • Cooper Energy

  • Karoon

  • Carnarvon

  • Senex

  • FAR

  • New Century Resources

Market Forces says these companies are expanding the fossil fuel sector or relying on scenarios consistent with the failure of the Paris Agreement to justify their future projects. BHP, while also meeting many of the criteria for being on this list, has committed to changing its business in alignment with the Paris Agreement.

Market Forces will be calling for superannuation funds to divest, saying these companies are hurting the environment and aren’t a good investment. The COVID-19 market corrections and oil crash have resulted in a drop in market cap, with the total market cap drop of the companies falling by over 50 per cent, compared with other ASX 300 companies seeing drops of just over 35 per cent.

UniSuper has holdings in Santos, APA Group and Woodside, with a recent petition signed by over 10,000 UniSuper members urging the fund to divest. HESTA also invests in Woodside.