BlackRock, the world’s largest asset manager, has thrown its support behind a push for Australian energy giant AGL to bring forward the closure dates of its remaining coal-fired power stations.
AGL faced an investor revolt on Wednesday, as more than 20 per cent of the company’s shareholders backed a resolution for the board to align the retirement of the Loy Yang A power plant in Victoria and its Bayswater station in New South Wales with a strategy to limit global warming to 1.5 degrees.
This would mean shutting Loy Yang A, the largest brown coal fired power plant in Victoria, at least 12 years before AGL’s planned 2048 closure.
While prominent local superannuation funds including Aware Super declined to support the motion, the $10 trillion BlackRock, which ranks as one of AGL’s top shareholders, voted in favour of it.
“Our support for this proposal is intended to encourage the company in its efforts to proactively and ambitiously manage the climate risk in its business model,” BlackRock said.
The pressure from shareholders on plant closures coincided with AGL receiving a “first strike” at its investor meeting on Wednesday after 46 per cent of shareholders voted against the company’s remuneration report.
Company chairman Graeme Hunt said that investors and key proxy advisers had specifically objected to the granting of long-term incentive rights to chief executive Brett Redman.
If the company receives a second strike next year, it will face a resolution to spill the entire board.
AGL is Australia’s largest energy generator and heaviest carbon emitter, accounting for 8 per cent of national emissions. Like many top polluters, it has faced a rising tide of pressure both from activists and increasingly climate-conscious major investors to improve its carbon credentials and, in particular, reduce reliance on thermal coal.
BlackRock praised AGL for being responsive to investor feedback, recently committing to link emissions-reduction goals to executive remuneration and steadily improving climate-related disclosures to incorporate the potential business impacts of a scenario whereby the world acts to limit warming to 1.5 degrees.
“That said, as our support for this proposal suggests, we believe there is room for improvement,” BlackRock said.
The resolution for an accelerated coal exit, prepared by the Australasian Centre for Corporate Responsibility (ACCR) and co-filed by 100 shareholders, gained 20.4 per cent of shareholders’ support on Wednesday, but was not supported by the board and several other prominent AGL investors.
“BlackRock’s support for this resolution embarrasses Australian super funds and asset managers who voted against the resolution,” ACCR climate director Dan Gocher said. “It demonstrates an increasing trend that European and US investors are more prepared to take critical action to address climate risk.”
Mr Hunt had implored shareholders to vote the resolution down, pointing out that its current timelines to shut Baywaster in 2036 and Loy Yang A in 2048 were aligned with goals to limit global warming to well below 2 degrees above pre-industrial levels. The dates are not, however, in line with the more ambitious Paris agreement goal of keeping planetary warming to 1.5 degrees.
Mr Hunt repeatedly told investors on Wednesday that the future was uncertain and it was not AGL’s policy to commit unilaterally to outcomes of particular global-warming scenarios. However, in response to several questions, he described the planned closure dates of 2035 and 2048 as “backstops” that were subject to ongoing review depending on economic conditions including the continued increase of renewable energy and future supply and demand.
“It is very possible that those closure dates could come forward based on changes in the economic environment over the coming years, although under all modelling it is clear that Bayswater and Loy Yang will be required well into the 2030s,” he said.
Investors who backed the resolution expressed concern not only about the emissions generated by AGL’s remaining fleet of coal generators, but also the increasingly significant maintenance costs required to keep the ageing and failure-prone facilities running. AGL’s expenditure to sustain its existing operations has more than doubled from $255 million in 2014 to $536 million in 2020, one investor said.
BlackRock noted that Loy Yang A would be more than 60 years old if it was kept in service until 2048, raising operational concerns in relation to reliability and safety.
Source: Thanks smh.com