Thursday, 10 July 2014

Fossil Fuel Divestment - Part 2: The role of New Zealand in the movement

By Luke Harrington

As discussed in my previous post ‘Fossil Fuel Divestment Part 1: Can it really make a difference’, the notion of divesting from fossil fuels has started to gain traction following a movement led by 350.org founder Bill McKibben – to date, some 63 US institutions (including Stanford University), as well as the cities of Seattle and San Francisco, have committed to divesting fossil fuel stocks.

The global divestment campaign has recently started to have an influence in New Zealand too. While our universities do not have large endowments like their US counterparts, other organisations, such as Westpac, have been targeted by activists for supporting fossil-fuel-related ventures. State-owned funds also have large investments in oil, gas and coal companies. While these entities have actively divested from the nuclear industry in the past, they seem unwilling to do the same for fossil fuels at present. Here, we look at how New Zealand organisations, both government and commercial, are influenced by the fossil fuel divestment debate, and how one New Zealand city is leading by example.

There has been recent media coverage over Westpac New Zealand providing financial support for Bathurst Resources Ltd, the company granted resource consents for new coal mining in the Denniston Plateau. According to one assessment, all open-cast mining operations in Buller, including those across the ecologically rich Denniston Plateau, could extract up to 84 million tonnes of coking coal, which when burned could produce up to 218Mt of CO2. It is important to note the controversial Escarpment project itself actually only has an estimated six million tonnes of coal within its reservoir. A spokesman for Westpac has emphasised that the bank only provided banking services to Bathurst Resources, and “has not been involved in financing Bathurst’s Denniston Enscarpment Mine project.” Westpac NZ won the award for NZI Sustainable Business of the Year 2011 and was named Cannex Canstar Most Socially Responsible Bank in 2012. Westpac’s argument for mutual exclusivity between providing financial support for Bathurst more broadly and financing the specific Denniston operation has been criticised by protest organisers (Coal Action Network Aotearoa and 350 Aotearoa). Irrespective of who’s correct, the negative publicity directed at Westpac alone exemplifies the potential stigmatisation associated with continued investment in fossil fuels (as discussed in my original post).   It is interesting to note that Bathurst has subsequently suspended development of the Escarpment Mine project because it is unprofitable at present, with international coal prices at a nine-year low.   

There are several government-owned funds in New Zealand with large investment portfolios that to date have not moved toward fossil fuel divestment. The New Zealand Superannuation Fund manages a NZ$26 billion asset portfolio, and has an ongoing list of companies which they do not invest in as part of their “Responsible Investment” policy. These include companies that are directly involved in the manufacture of tobacco, cluster munitions and even the processing of whale meat. This list of excluded companies is updated annually to “avoid prejudicing New Zealand’s reputation as a responsible member of the world community and to apply best-practice portfolio management.” In 2008 the Fund made the decision to also divest from those companies involved in the manufacture or testing of nuclear explosive devices. Perhaps this continual evaluation of the exclusion criteria could, with encouragement, offer an opening for consideration of fossil fuel divestment in the near-to-medium term.

In contrast to the “business as usual” approach  observed to date among some of New Zealand’s large players, others organisations are taking a different approach.  One example is the divestment decisions taken by five Anglican Church Dioceses of New Zealand.  Another example is the Sustainable Business Network, which is proposing pragmatic and positively focused approaches to help with companies’ transition toward a sustainable business model. SBN is conducting a public survey to assess support for a sustainable KiwiSaver fund which would reward businesses that meet positive criteria for sustainability (for more details, see SBN’s guest blog here).

As Crown, commercial and other entities consider whether to modify their responsible investment criteria to exclude fossil fuel companies, they can look to the precedent set by the Dunedin City Council. On 13 May 2014, Councillors voted in favour of an ethical investment policy for the NZ$76 million Waipori Fund, which excludes any companies involved in the “fossil fuel extraction industry.” This will result in the divestment of the $1.7 million currently invested in fossil fuels. While only a relatively minor investment, this gesture by the Council demonstrates not only leadership that others in New Zealand could aspire towards, but also marks another step along the life cycle of the fossil fuel divestment movement, as discussed in my previous post. These are indeed clear signs that the worldwide fossil fuel divestment campaign is producing shifts in New Zealand.

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