Two of Australia’s largest super funds will vote against a shareholder proposal to bring forward the closure of AGL’s coal fired Loy Yang power plant in Victoria, despite bolstering their climate policies this year.
The energy giant is facing a push, led by the Australasian Centre for Corporate Responsibility (ACCR), at its annual general meeting on Wednesday to shut down Loy Yang – the largest brown coal fired power plant in Victoria – ahead of its stated closure date of 2048.
While the ACCR argues the ballooning costs needed to keep the ageing plant open warrant an early closure, the idea has found little support from institutional investors including the country’s second largest super fund, Aware Super, and $54 billion construction industry fund, Cbus.
The fund, like Cbus, committed to having net zero emissions across its investment portfolios by 2050 and Aware Super head of responsible investment Liza McDonald said she had pushed AGL to improve its efforts on climate.
“Our engagement has been successful in the last few years in terms of a number of outcomes — reporting under the TCFD disclosure, doing scenario analysis, setting targets around reducing emissions from their operations,” Ms McDonald said.
Aware Super was concerned about AGL’s expenditure on maintenance but trusted the board’s competence in managing the company’s assets, Ms McDonald said.
“We continue to engage with AGL in terms of how they’re spending their capex,” she said. “But we think AGL are in the best position to manage their assets, manage it in the most effective way.”
Cbus’ head of responsible investments Nicole Bradford did not provide reasons for voting against the proposal but pledged to continue its policy of engagement. “Cbus will continue to engage with AGL to safeguard our members’ investments as the financial impacts and physical effects of climate change intensify.”
However, ACCR’s head of climate Dan Gocher isn’t convinced and said the lack of support from institutional investors had been “disappointing”.
“The frustrating thing for this resolution was we thought these arguments were the most compelling we have put forward in some time,” Mr Gocher said. “They were actually not only about climate.”
AGL spent $1 billion, the highest ever amount, last financial year on managing its ageing fleet of thermal coal plants, including Victoria’s Loy Yang and its black coal plant Bayswater in NSW.
Mr Gocher said the company was prioritising maintenance costs over investments in renewable energy projects and this should provide the financial and ethical incentive for super funds to support the early closure.
“Loy Yang was out for nine months last year,” he said. “It’s 2020, they think it’s going to go for another 28 years. They’re kidding.”
Proxy firm ISS, which supported climate resolutions at AGL’s AGM last year that sought greater transparency in climate reporting and disclosure, said the ACCR’s latest proposal was “too prescriptive”.
“Last year it was about information on policies,” ISS research director Vas Kolesnikoff said. “This year they’re saying close down the power station.”
Mr Kolesnikoff said maintenance costs were a part of any company but acknowledged coal plants were costly. Other proxy firms, Ownership Matters and Glass Lewis, have also recommended a vote against the proposal.
“There’s validity in this, we’ve seen that in the US where [coal] companies have gone bust,” he said. “But what else do you do? If you don’t maintain them they will become dilapidated.”
The ACCR’s proposal does not put a date on when the plant, that produces 30 million tonnes of thermal coal each year supplies 30 per cent of the state’s electricity, should be closed. Rather, it asks the closure be guided by a strategy to limit the increase in global temperatures to 1.5 degrees.
“We’re saying leave it up to management, but bring it forward,” Mr Gocher said.
Ms McDonald said the proposal’s wording meant the plant would have to be closed by 2036 and this was not in the interest of shareholders.”We just think that is not commercial.”
Industry super funds Cbus and Hesta also came out with revamped climate policies this year, but did not respond to questions about how they would vote on the proposal at AGL’s annual general meeting.
Source: Thanks smh.com