Saving for retirement gives you power, and ethical responsibilities

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Peter Mares, Monash University

If you’re in a super fund, then, like it or not, you’ve got ethical decisions to make.

More than 10 million Australians have a superannuation account. Which means, effectively, more than 10 million of us are mini-shareholders with the capacity to influence future business decisions.

With that power, however small, comes responsibility. And nowhere more apparent than in relation to climate change.

Last month, the world’s biggest asset manager, BlackRock, surprised Australia’s biggest electricity producer and carbon dioxide emitter, AGL, by backing a motion that would have forced it to close its coal-fired plants earlier than planned.

The resolution at AGL’s annual general meeting failed, but when a global firm managing more than US$7 trillion in investors’ savings says it’s time to accelerate the exit from coal, it’s wise sit up and take notice.

Interestingly though, some of Australia’s biggest industry super funds, among them Cbus, Hesta and Aware, refused to support the motion, which was put forward by the Australasian Centre for Corporate Responsibility.

Work ‘behind the scenes’

It’s been a pattern with industry super funds.

Rather than using their overt voting power to try to change corporate behaviour, or divest from companies altogether, they say they prefer to exert influence behind the scenes, through conversations in board rooms and executive suites.

Take, UniSuper, to which I contribute. It says it engages with companies “to encourage rapid decarbonisation of their operations and supply chains”.

UniSuper is one of only three industry funds to commit to achieving net zero carbon emissions across its portfolio by 2050 — the others are Cbus and HESTA.

Yet doubling down on gas

UniSuper has joined eight other funds in divesting from companies that predominantly make their money from producing coal for electricity generation.

Big gas plans for the Burrup Peninsula.

Yet if your retirement savings are in UniSuper’ default balanced option, then they are partly invested in Woodside, a company seeking to build a huge new gas hub on the Burrup Peninsula in Western Australia.

Woodside says the hub, which will operate for “decades into the future”, could process more gas than the entire volume extracted so far from another of its resource projects, the North West Shelf which began operations 36 years ago.

If you’ve chosen UniSuper’s conservative option, then you are not only invested in Woodside, but also in Santos, which is behind the contested Narrabri coal seam gas project in NSW.

UniSuper’s annual report on climate risk also reveals smaller investments in gas producers Origin and Oil Search.

Experts say worldwide gas use needs to peak before 2030 in order to keep global warming below agreed levels.

It means UniSuper, and other big funds, are investing our collective retirement savings in firms whose corporate strategies threaten our collective future.

Read more:
UniSuper take note: there’s no retirement on a dead planet

UniSuper cites AGL as an example why it stays with polluting companies. While it runs power stations fuelled by coal and gas, it also invests in renewable technology.

It says, if it were to divest, its AGL shares might be acquired by investors with less concern for the environment.

it can be in the best interests of the environment and society for the assets to be held by a responsible and reputable entity.

It’s a justification that could equally be used to defend running a gambling venue — if I didn’t install poker machines, someone else would, and at least I care for my customers.

(As it happens, UniSuper’s “balanced” option includes shares in Aristocrat Leisure, a leading maker of gaming machines.)

Super funds have more power than they use

The justification sidesteps the question of whether the investment itself is defensible.

And it ignores the opposing argument — that divestment by a leading super fund can send a powerful signal to the market that a company is not properly addressing climate risk or developing an appropriate strategies for a carbon-constrained world.

Any company not doing these things is putting our savings at risk.

According to expert legal opinion, its directors might be breaching their obligations under the Corporations Act.

We’ve got power ourselves

There are legitimate arguments to be had about the best way for super funds to push businesses to act more urgently on climate change, but as fund members, and the ultimate owners of our money, we need to make up our own minds and act accordingly.

To sit back and let others do it on our behalf is an abrogation of responsibility.

Superannuation may be compulsory, but we still have choices.

We can find out which companies our retirement savings are invested in, and swap to a more sustainable option in the same fund.

Read more:
Super funds are feeling the financial heat from climate change

This can take some digging around, but as with UniSuper, some the information is available on the fund’s website or can be obtained by asking questions.

Or we can consider switching to a different fund altogether. There are websites that track and compare superannuation investments in fossil fuels.

For a range of reasons, it’s more difficult to switch to a new fund for UniSuper members.

But even where it isn’t possible, we can write to our funds, urging them to engage more actively on climate change. It’s easy to find the addresses. They are forever sending us emails.

Read more:
Super power: why the future of Australian capitalism is now in Greg Combet’s hands

It’s what they say they do with fossil fuel companies — engage them in conversations. We can tell them where we want our savings invested and how we want them to use their clout to influence company decisions and vote at shareholder meetings.

We can do this as individuals, and we can band together with like-minded fund members to speak with one voice.

With a combined A$2.9 trillion in assets, one fifth of which are invested in Australian companies listed on the stock exchange, super funds own a fair chunk of Australia’s most important companies.

It would be wrong for them not to take that responsibly seriously, just as it would be wrong of us not to take seriously what our savings are being used for.The Conversation

Peter Mares, Lead Moderator, Cranlana Centre for Ethical Leadership, Monash University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Household savings figures in Turnbull’s energy policy look rubbery

Michelle Grattan, University of Canberra

The big questions about Malcolm Turnbull’s energy policy will be, for consumers, what it would mean for their bills and, for business, how confident it can be that the approach would hold if Bill Shorten were elected.

The government needs to convince people they’ll get some price relief, but even as Turnbull unveiled the policy the rubbery nature of the household savings became apparent.

Crucially, the policy aims to give investors the certainty they have demanded. But the risk is this could be undermined if Labor, which is well ahead in the polls, indicated an ALP government would go off in yet another direction.

And most immediately, there is also the issue of states’ attitudes, because their co-operation is needed for the policy’s implementation. Turnbull talked to premiers after the announcement, and the plan goes to the Council of Australian Governments (COAG) next month.

Turnbull describes the policy as “a game-changer” that would deliver “affordability, reliability and responsibility [on emissions reduction]”.

Unsurprisingly – given it would end the subsidy for renewables, rejecting Chief Scientist Alan Finkel’s recommendation for a clean energy target – the policy sailed through the Coalition partyroom with overwhelming support.

Finkel later chose to go along with it rather than be offended by the discarding of his proposal. The important thing, he said, was that “they’re effectively adopting an orderly transition” for the energy sector, which was what he had urged.

In the partyroom Tony Abbott was very much a minority voice when he criticised the plan; his desire for a discussion of the politics was effectively put down by a prime minister who had his predecessor’s measure on the day.

The policy – recommended by the Energy Security Board, which includes representatives of the bodies operating and regulating the national energy market – is based on a new “national energy guarantee”, with two components.

Energy retailers across the National Electricity Market, which covers the eastern states, would have to “deliver reliable and lower emissions generation each year”.

A “reliability guarantee” would be set to deliver the level of dispatchable energy – from coal, gas, pumped hydro, batteries – needed in each state. An “emissions guarantee” would also be set, to contribute to Australia’s Paris commitments.

According to the Energy Security Board’s analysis, “it is expected that following the guarantee could lead to a reduction in residential bills in the order of A$100-115 per annum over the 2020-2030 period”. The savings would phase up during the period.

When probed, that estimate came to look pretty rough and ready. More modelling has to be done. In Question Time, Turnbull could give no additional information about the numbers, saying he only had what was in the board’s letter to the government.

So people shouldn’t be hanging out for the financial relief this policy would bring. Although to be fair, Turnbull points to the fact it is part of a suite of measures the government is undertaking.

Business welcomed the policy, but made it clear it wanted more detail and – crucially – that it is looking for bipartisanship.

The Australian Chamber of Commerce and Industry said the policy’s detail “and its ability to win bipartisan and COAG support will be critical”. Andy Vesey, chief executive of AGL, tweeted that “with bipartisan support” the policy would provide investment certainty.


The Australian Industry Group said it was “a plausible new direction for energy policy” but “only bipartisanship on energy policy will create the conditions for long-term investment in energy generation and by big energy users”.

It’s not entirely clear whether the government would prefer a settlement or a stoush with the opposition on energy.

Turnbull told parliament it had arranged for the opposition to have a briefing from the Energy Security Board, and urged Labor to “get on board” with the policy.

But Labor homed in on his not giving a “guarantee” on price, as well as the smallness of the projected savings. Climate spokesman Mark Butler said it appeared it would be “just a 50 cent [a week] saving for households in three years’ time, perhaps rising to as much as $2.00 per week in a decade”.

But while the opposition has gone on the attack, it is also hedging its bets, playing for time.

“We’ve got to have … some meat on the bones,” Butler said. “Because all the prime minister really announced today was a bunch of bones.”

“We need detail to be able to sit down with stakeholders, with the energy industry, with big businesses that use lots of energy, with stakeholder groups that represent households, and obviously state and territory governments as well, and start to talk to them about the way forward in light of the announcement the government made today,” he said.

The initial reaction from state Labor is narky. Victorian Premier Daniel Andrews said it seemed Finkel had been replaced by “professor Tony Abbott as the chief scientist”, while South Australia’s Jay Weatherill claimed Turnbull “has now delivered a coal energy target.”

These are early days in this argument. Federal Labor will have to decide how big an issue it wants to make energy and climate at the election. Apart from talking to stakeholders and waiting for more detail, it wants to see whether the plan flies at COAG.

If it does, the federal opposition could say that rather than tear up the scheme in government, it would tweak it and build on it. That way, Labor would avoid criticism it was undermining investment confidence.

The ConversationBut if there is an impasse with the states and the plan is poorly received by the public, the “climate wars” could become hotter.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Article: Greek & Spanish Savings Flee Eurozone Crisis

The link below is to a report on the latest news out of the European Union, where Greek and Spanish savings are being withdrawn rapidly.

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